tag:theconversation.com,2011:/us/topics/smes-3159/articlesSMEs – The Conversation2023-10-16T15:38:09Ztag:theconversation.com,2011:article/2146782023-10-16T15:38:09Z2023-10-16T15:38:09ZHow smaller businesses can become net-zero influencers and enablers<figure><img src="https://images.theconversation.com/files/553540/original/file-20231012-29-67dqep.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C6639%2C4446&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/man-getting-haircut-hair-stylist-barber-2075358466">Rawpixel.com/Shutterstock</a></span></figcaption></figure><p>What if all of the UK’s <a href="https://www.nhbf.co.uk/about-the-nhbf/industry-statistics/">48,000 hairdressing salons and barbershops</a> started sharing water and energy-saving advice with their clients, alongside a clipper cut or a wash and blow dry? <a href="https://link.springer.com/article/10.1007/s10551-014-2398-y?sa_campaign=email/event/articleAuthor/onlineFirst">Previous studies</a> have demonstrated that hairdressers can shape customers’ environmental behaviour with guidance they can trust and that relates to their everyday lives.</p>
<p>And it’s not just hairdressers. Cafes and restaurants are also addressing food-related emissions with carbon labelling schemes and more sustainable menu choices.</p>
<p>Recruiting smaller businesses to support the drive for net zero makes a lot of sense. More than half of the UK’s business emissions are <a href="https://www.british-business-bank.co.uk/wp-content/uploads/2021/10/J0026_Net_Zero_Report_AW.pdf">estimated</a> to come from its 6 million small and medium-sized enterprises (SMEs – companies with less than 250 employees). As the authors of a <a href="https://www.oecd.org/publications/no-net-zero-without-smes-bab63915-en.htm">recent OECD report</a> argue, there’s “no net zero without SMEs”.</p>
<p>But the decarbonisation of smaller firms has only recently attracted serious attention from policymakers, through initiatives such as the <a href="https://smeclimatehub.org/uk/">UK Business Climate Hub</a>. And while criticism of Rishi Sunak’s watering-down of net-zero policies has <a href="https://www.telegraph.co.uk/business/2023/09/28/city-aviva-universities-pension-city-revolt-sunak-net-zero/">united environmental campaigners with some company bosses and investors</a>, it may not be enough to keep SMEs and their emissions in the spotlight.</p>
<p>SMEs are important as energy consumers, and there is an increasing focus on the carbon they emit directly, or that is embedded in their products and services. However, as highlighted in <a href="https://doi.org/10.1016/j.gloenvcha.2023.102707">a recent study</a> I worked on with colleagues at Oxford and Sheffield Hallam universities, smaller businesses can also help cut emissions as behavioural “influencers” and “enablers” of change.</p>
<p><strong>How SMEs can help meet net zero goals</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/551248/original/file-20230930-27-oldojm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Table explaining SME net zero roles: consumers, influencers, enablers." src="https://images.theconversation.com/files/551248/original/file-20230930-27-oldojm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/551248/original/file-20230930-27-oldojm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=292&fit=crop&dpr=1 600w, https://images.theconversation.com/files/551248/original/file-20230930-27-oldojm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=292&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/551248/original/file-20230930-27-oldojm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=292&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/551248/original/file-20230930-27-oldojm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=367&fit=crop&dpr=1 754w, https://images.theconversation.com/files/551248/original/file-20230930-27-oldojm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=367&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/551248/original/file-20230930-27-oldojm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=367&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><a class="source" href="https://www.sciencedirect.com/science/article/pii/S0959378023000730?via%3Dihub">Crisis and opportunity: transforming SME governance for net zero. S. Hampton, R. Blundel, W. Eadson, P. Northall and K. Sugar (2023) </a>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
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<p>SMEs could have a vital role as enablers by helping with the wider adoption of low-carbon technologies. The scope of this type of activity is vast. For example, leading-edge innovations like the <a href="https://belfastmaritimeconsortium.com/">Belfast Maritime Consortium’s</a> high-speed, zero-emission passenger ferry (which is launching a <a href="https://www.irishnews.com/news/northernirelandnews/2022/04/12/news/zero-emission-commuter-ferry-service-to-run-between-belfast-and-bangor-2641656/">pilot scheme</a> in 2024) could help lots of commuters to cut their daily travel emissions.</p>
<p>In addition, many thousands of plumbers and electricians are already playing essential <a href="https://journals.sagepub.com/doi/10.1177/1420326X15600775">intermediary roles</a> as advisors and installers of more established technologies, such as electric vehicle chargers and heat pumps.</p>
<h2>Persistent challenges and hopeful signs</h2>
<p>Businesses need to adopt low-carbon technologies and practices to improve productivity, remain competitive and attract staff. The scale and complexity of this challenge varies greatly between sectors. But all businesses could benefit from a <a href="https://www.theccc.org.uk/publication/how-can-policy-better-support-smes-in-the-pathway-to-net-zero-energy-saving-trust/">more joined-up</a> support framework to help them achieve their goals.</p>
<p>In fact, many smaller businesses are effectively flying in the dark. A recent study estimates that <a href="https://www.enterpriseresearch.ac.uk/publications/the-less-than-1-club-mapping-net-zero-support-for-small-businesses-across-england/">just 1% of SMEs in England are accessing net-zero business support</a>. Our <a href="https://doi.org/10.1016/j.gloenvcha.2023.102707">research</a> on support arrangements for SME decarbonisation points to large variations in provision across the four UK nations and between different industry sectors. </p>
<p>Scotland has provided consistent support to SMEs over the last decade, for example, with expert energy audits and subsidised grants available. By contrast, smaller businesses in England have not had access to a national funding programme for building energy efficiency.</p>
<p>Similarly, while SMEs in industries such as food and hospitality are relatively well represented by trade associations that can provide more tailored net-zero advice, we have identified significant issues with access to business support in other sectors. </p>
<p>SMEs operating in large industrial supply chains, for example, often have to navigate an array of regulations and measures from different government departments that do not always appear to be speaking to one another. This generates cost and confusion for many smaller businesses as they struggle to find the right support.</p>
<h2>Taking SMEs more seriously</h2>
<p>The government’s <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1128689/mission-zero-independent-review.pdf">net-zero review</a>, chaired by Chris Skidmore MP and published in January 2023, was commissioned to identify a pathway to meet the UK’s net-zero target by 2050. It provided a clear set of policy actions designed to trigger an “<a href="https://ambitionloop.org/">ambition loop</a>” in which government policy and private sector leadership reinforce each other to increase climate action even further. </p>
<p>But while Skidmore mentions SMEs, there are three key areas where more radical change is needed to help them make a real impact on the UK’s decarbonisation goals:</p>
<p><strong>1. Information and signposting</strong></p>
<p>The review proposed a “Help to Grow Green” campaign, offering information, resources and vouchers for SMEs to plan and invest in the net-zero transition. The UK government’s <a href="https://www.gov.uk/government/organisations/department-for-energy-security-and-net-zero/about">Department for Energy Security and Net Zero</a> is piloting a new digital energy advice service to help SMEs navigate the maze of competing information sources. But to be really effective, tailored advice and meaningful support is crucial – a balance that’s difficult to achieve in practice.</p>
<p><strong>2. Energy efficiency</strong></p>
<p>Skidmore also called for SMEs to be included in tax reforms to accelerate uptake of energy-efficient technologies. Initiatives of this kind could also help drive improved SME productivity – a longstanding government goal. However, there are few signs of this kind of fiscal incentive in the pipeline right now, at least at a national level.</p>
<p><strong>3. Carbon skills gap</strong></p>
<p>The review highlighted skills gaps in many specialist areas, such as carbon auditing, as well as across sectors and places. A step-change in investment in further education colleges in particular is needed to expand the number of courses, apprenticeships, and knowledge-exchange initiatives. Again, this would help business productivity while also promoting net-zero targets.</p>
<p>The UK’s SME population can make a massive difference to the delivery of the country’s carbon targets, but it will require a more concerted effort. The government must take the lead, working with sector- and place-based organisations.</p>
<p>The agenda is already mapped out in some detail, but delivery is another matter. There is a lot to learn from existing best-practice examples across the four nations, and by expanding our understanding of SMEs and their multiple roles as net-zero consumers, influencers and enablers.</p><img src="https://counter.theconversation.com/content/214678/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard K. Blundel has received funding from ESRC and UKERC. </span></em></p>SMEs could help the UK maintain its position as a climate change champion and ensure a long-term future for all businesses, large or smallRichard K. Blundel, Professor of Enterprise and Organisation and Director of the Centre for Social and Sustainable Enterprise (CSSE), The Open UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2008712023-03-15T12:31:39Z2023-03-15T12:31:39ZPower cuts are hurting small businesses in South Africa - but sharing resources and equipment might be a solution<figure><img src="https://images.theconversation.com/files/514449/original/file-20230309-28-bnvma.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A corner shop in Khayelitsha, Cape Town. Small businesses could benefit from sharing resources, like electricity.</span> <span class="attribution"><span class="source">Photo by Per-Anders Pettersson/Getty Images</span></span></figcaption></figure><p>Worldwide, small and medium enterprises <a href="https://www.worldbank.org/en/topic/smefinance">(SMEs) are seen as the backbone</a> of a thriving economy. They make up a substantial portion of the total number of companies and are estimated to contribute over <a href="https://www.oecd-ilibrary.org/sites/4bada6a3-en/index.html?itemId=/content/component/4bada6a3-en">87% of all jobs</a> globally. </p>
<p>A recent <a href="https://www.weforum.org/reports/global-risks-report-2023/">World Economic Forum report</a> showed that major disruptions affect the value chain of SMEs significantly more than they affect larger enterprises. Disruptions, such as COVID-19 and geo-political tensions, often lead to failure among these businesses.</p>
<p>In South Africa, an example of <a href="https://www.iol.co.za/news/politics/opinion/a-total-of-71-of-businesses-affected-by-load-shedding-237e8723-baac-489b-b15d-387005b181f1">a significant risk to SMEs is the acute shortage of power</a>. Power outages mean that they can’t operate. No production or trade is possible, and inventory is damaged. The enterprises can’t plan and execute their operations effectively, or meet the demands of their customers. They can lose revenue and customers. </p>
<p>South Africa’s acute <a href="https://www.aljazeera.com/features/2023/2/9/in-south-africa-load-shedding-takes-a-toll-on-small-businesses">power shortages</a> are likely to go on for some time. But we believe that the concept of the <a href="https://www.mdpi.com/2673-8392/2/3/88">sharing economy</a> holds promise to minimise disruptions.</p>
<p>The concept is based on sharing and collaborating through digital platforms within a community with similar characteristics. In our view, based on the work from our doctoral research specialising in the digital transformation of small and medium enterprises, we argue that small and medium enterprises could use platforms like this to minimise the adverse effects of the ongoing power cuts. </p>
<p>For example, they could share energy generation infrastructure such as mobile battery storage units, portable generators and solar panels. </p>
<p>In addition, by sharing resources and equipment, SMEs could reduce operational costs and increase their resilience in the face of power cuts. The sharing economy could also help them connect with other businesses in their community, creating new opportunities for collaboration and partnerships.</p>
<h2>Where it’s worked</h2>
<p>There are examples of this approach working elsewhere.</p>
<p><a href="https://sonnengroup.com/sonnencommunity/">SonnenCommunity</a> is a sharing economy platform that allows homeowners with a battery-based energy storage system to share their excess energy with community members. It’s used in a host of countries, including Germany, Australia, the US, Italy and the UK.</p>
<p>Members of this community are connected through a digital platform that enables energy trade and communication between members. </p>
<p>Another example is <a href="https://energizelives.gridmates.com/how_it_works">Gridmate</a>. This is a peer-to-peer energy-sharing platform allowing people to donate energy to those in need. </p>
<p>In the South African context energy generation infrastructure could be shared among community members with different scheduled power cuts. This could include portable generators and mobile battery storage units.</p>
<p>However, for the system to work, communities setting up this arrangement must be in close proximity to one another. This is because the scheduled power cuts – known as load shedding – are normally set up in a way that one zone will have power, while another has its power cut. </p>
<p>For this idea to work, the zones or load shedding blocks with complementary power outage schedules should be in close proximity to each other. </p>
<p>The whole process is powered by digital platforms that facilitate sharing. For example, a digital platform could be set up by local business forums where there could be shared purchasing, crowdfunding, crowdsourcing, and promotion of collective consumption. </p>
<h2>The potential of the sharing economy in small and medium enterprises</h2>
<p>Power outages are having a <a href="https://www.iol.co.za/news/politics/opinion/the-catastrophic-impact-of-load-shedding-will-the-economy-recover-0d086bb3-148b-45aa-b525-c92f2f214f95">ripple effect on the economy</a>. They are causing delays in the delivery of goods and services, affecting consumer confidence, and ultimately leading to a <a href="https://www.ft.com/content/c1168eef-2869-47b3-a597-471f485b7009">decline in economic growth</a>.</p>
<p>For some small and medium enterprises, load shedding is a life-and-death issue. The sharing economy would allow them to continue making a living. </p>
<p>This is particularly true for businesses operating in disadvantaged communities. These often face additional challenges in accessing energy due to location, limited infrastructure, financial constraints and other factors. A more affordable and equitable energy system would allow businesses to share resources and infrastructure.</p><img src="https://counter.theconversation.com/content/200871/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>By sharing resources and equipment, SMEs could reduce operational costs and increase their resilience in the face of power cuts.Ofentse Olunloyo, Doctoral Candidate specialising in the Digital Transformation of Small, Medium and Micro Enterprises (through the Sharing Economy) | Master in Business Administration (MBA) | Digital Marketing Expert, University of JohannesburgTankiso Moloi, Full Professor and Director: Academic at the Johannesburg Business School, University of Johannesburg, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1934842022-11-15T17:22:38Z2022-11-15T17:22:38ZRegulations can burden small businesses but our research shows they can also help them grow<figure><img src="https://images.theconversation.com/files/494288/original/file-20221108-12-r54gn4.jpg?ixlib=rb-1.1.0&rect=24%2C24%2C8007%2C5322&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Small businesses can benefit from following rules.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/muslim-woman-small-business-her-own-1687929076">Dragana Gordic / Shutterstock</a></span></figcaption></figure><p>A couple of weeks before her short stint as prime minister ended, Liz Truss delivered on a pledge to tackle what some – including Truss – saw as red tape holding back “thousands of growing businesses” in the UK. The move focused on exempting small businesses from certain regulations to help <a href="https://www.ft.com/content/799ed62c-86bc-469d-a442-d1553c6e47ec">stimulate growth</a>. It involved expanding the government’s <a href="https://www.gov.uk/government/news/red-tape-cut-for-thousands-of-growing-businesses">definition of “small business”</a> to release “thousands of UK businesses” from reporting requirements and regulations.</p>
<p>Small businesses are an undoubtedly important part of the economy. The latest <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1106039/2022_Business_Population_Estimates_for_the_UK_and_regions_Statistical_Release.pdf">UK government figures</a> (based on previous definitions) indicate that small and medium-sized enterprises (SMEs) account for 99.9% of businesses, contributing 61% of total employment in the private sector.</p>
<p>Many critics of regulation believe rules hold businesses back. Indeed, following Brexit, former government minister Jacob Rees-Mogg identified in excess of <a href="https://www.theguardian.com/politics/2022/nov/08/government-finds-extra-1400-laws-scrap-rees-mogg-brexit-bill">2,400 EU laws for swift removal</a> as part of a bid to stimulate UK economic growth. Our research reviewed a range of evidence on this issue. It <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/ijmr.12191">confirms</a> that regulations can be burdensome for small business, but the relationship is not that simple. In fact, some “red tape” can even be good for such firms.</p>
<p>Perception surveys often ask owner-managers about regulatory burdens. When asked whether regulations are hindering growth, a reasonable proportion of owner-managers will typically respond that they are, according to our research. The exact figures vary from survey to survey, and regulation is never reported as the most significant issue, but we find that it does regularly feature <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/712010/sme-growth-regulation.pdf">on the list</a> of obstacles for such firms.</p>
<p>That complying with regulations can be a burden is not surprising. Proper regulatory compliance takes time and, potentially, other resources that can be in short supply in small businesses. However, this is no different from other managerial tasks that place demands on an owner-manager’s time. </p>
<p>And if we look more deeply into the evidence on regulations and business growth, we find a much more complicated picture. Regulations do not always hinder business growth. In fact, there are a variety of ways in which they support it.</p>
<h2>Regulating for a reason</h2>
<p>Rules help markets to operate effectively. They can safeguard property rights, protect legitimate traders from the rogues and make workplaces safer. Regulations also limit the negative impacts businesses can have on wider society. For example, by setting duties and responsibilities to avoid pollution.</p>
<p>Regulations provide the stability and investment that small businesses <a href="https://theconversation.com/corporation-tax-u-turn-why-the-latest-change-means-more-uncertainty-for-uk-business-192641">need to grow</a>. Property rights and consumer protections, for example, support business <a href="https://www.sciencedirect.com/science/article/abs/pii/S0939362511000094">activities</a>. Owner-managers and entrepreneurs want protection for their property and innovations, and they want to be protected from unfair competitive practices. </p>
<p>There are also many products and services that are regulated for consumers’ peace of mind. Most people would prefer to be <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/714380/9.pdf">protected from poor quality or unsafe products</a>, for example. You may take for granted the protections in place when buying online, such as <a href="https://www.gov.uk/accepting-returns-and-giving-refunds">the right to cancel purchases</a>. These regulations are important to facilitate the successful conduct and popularity of internet businesses.</p>
<p>Health and safety and employment regulations also make businesses better, safer places to work and support healthy, productive employees. If small businesses were allowed to dispense with certain protections, the talented people that drive growth in these firms might then seek employment at larger companies with better overall conditions.</p>
<p>While some businesses report, for example, that health and safety rules are burdensome and of no value, a majority see them as sensible and say they create <a href="https://www.hse.gov.uk/regulation/assets/docs/understanding-impact-business-to-business-health-safety-rules.pdf">little additional work</a>. Importantly, government regulations <a href="https://www.hse.gov.uk/regulation/assets/docs/understanding-impact-business-to-business-health-safety-rules.pdf">are reported</a> as relatively less of a burden in comparison to the requirements of other external agencies such as insurers or supply chain partners. </p>
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<img alt="Yellow hard hat and safety goggles on a building site with cranes in the background." src="https://images.theconversation.com/files/494292/original/file-20221108-18-f3imln.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/494292/original/file-20221108-18-f3imln.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/494292/original/file-20221108-18-f3imln.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/494292/original/file-20221108-18-f3imln.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/494292/original/file-20221108-18-f3imln.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/494292/original/file-20221108-18-f3imln.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/494292/original/file-20221108-18-f3imln.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Health and safety at work.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/yellow-helmets-gloves-radio-communication-safety-1028700064">FLUKY FLUKY / Shutterstock</a></span>
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<h2>Supporting business growth</h2>
<p>Debates about how to support business growth and productivity often centre on the claim that small businesses lack sufficient <a href="https://productivityinsightsnetwork.co.uk/2018/12/productivity-in-smes/">management expertise</a>. But the way in which management expertise develops in relation to regulatory compliance is too often ignored. </p>
<p>This includes learning to identify which outside influences are most likely to affect your business (for example, large business customers or others within a supply chain), negotiating with these entities and adapting business practices to meet their requirements. In this way, regulatory compliance is part of a more generalised set of management skills that is valuable for any business.</p>
<p>Formalising such practices can form part of the changes that many businesses implement as they grow. This can involve standardising how tasks are completed by establishing routines and rules. This also enables other parts of the business to rely on tasks being completed in particular ways and for those methods to be communicated to new employees and external stakeholders.</p>
<p>In the same way, regulations often require the formalisation of key business practices. For example, employment regulations have been found to trigger the formalisation of HR practices. This supports delegation of tasks and greater fairness and transparency in <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/128792/13-638-employer-perceptions-and-the-impact-of-employment-regulation.pdf">management practices</a>.</p>
<figure class="align-center ">
<img alt="Jigsaw pieces depicting successful team work when a business formalises its procedures." src="https://images.theconversation.com/files/494290/original/file-20221108-8962-qu3008.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/494290/original/file-20221108-8962-qu3008.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/494290/original/file-20221108-8962-qu3008.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/494290/original/file-20221108-8962-qu3008.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/494290/original/file-20221108-8962-qu3008.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/494290/original/file-20221108-8962-qu3008.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/494290/original/file-20221108-8962-qu3008.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Regulations can help a business to support teamwork by formalising procedures.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/business-success-organizations-professional-team-cooperative-1326468401">Party people studio / Shutterstock</a></span>
</figcaption>
</figure>
<p>To improve management expertise and business growth, it has also been argued that small businesses can benefit from supportive external networks such as legal advisers, accountants or HR consultants. Significant government funds have been devoted to trying to encourage small businesses to engage more with such external services, for example through <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/498329/BIS-16-30-growth-vouchers-programme-evaluation-cohort-1-impact-at-6-months.pdf">subsidised consultancy schemes</a>. </p>
<p>What is often not acknowledged, however, are the ways in which regulations encourage or mandate engagement with these kinds of services. To ensure regulatory compliance, almost all businesses report engaging with at least one external source of advice and many with a range of <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/944356/business-perceptions-survey-2020-report.pdf">external service providers</a>. This has the potential to build trusted relationships and support networks that can help deliver the growth plans of a small business.</p>
<p>Complying with the regulations and requirements of powerful external stakeholders – suppliers, customers, the government – is central to managing a small business. These regulations can both enable and encourage small businesses to change and to grow.</p><img src="https://counter.theconversation.com/content/193484/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Oliver Mallett has previously received funding from the Department for Business, Energy and Industrial Strategy to review the evidence on regulations and small business growth. </span></em></p><p class="fine-print"><em><span>Robert Wapshott has previously received funding from the Department for Business, Energy and Industrial Strategy to review the evidence on regulations and small business growth. He has been part of the Better Regulation Executive's Network of Experts.</span></em></p>One of the Truss government’s few lasting acts was to cut regulations for small businesses to stimulate growth – but are rules a burden for such firms?Oliver Mallett, Professor of Entrepreneurship, University of StirlingRobert Wapshott, Associate Professor in Entrepreneurship and Innovation, University of NottinghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1911882022-10-13T16:43:30Z2022-10-13T16:43:30ZEnergy crisis: how to help small businesses survive and become more sustainable<figure><img src="https://images.theconversation.com/files/489379/original/file-20221012-22-u6tzkg.jpg?ixlib=rb-1.1.0&rect=27%2C9%2C5979%2C3998&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://unsplash.com/photos/-THiqda3iGM">adam winger / Unsplash</a></span></figcaption></figure><p>The number of companies in <a href="https://www.theguardian.com/business/2022/oct/07/company-insolvencies-hit-13-year-high-in-england-and-wales">financial distress</a> has spiked in parts of the UK to the <a href="https://www.ons.gov.uk/businessindustryandtrade/changestobusiness/bankruptcyinsolvency/articles/risingbusinessinsolvenciesandhighenergyprices/2022-10-07">highest level</a> since the 2007-8 global financial crisis laid waste to the global economy. The latest government figures show that in August more than one in ten UK businesses reported a moderate-to-severe risk of insolvency (being unable to pay the bills). Nearly a quarter of these companies say energy prices are their main concern.</p>
<p>Average annual energy bills can start at <a href="https://www.tylbynatwest.com/card-machines/no-time-to-waste">£3,000</a>, rising to as much as £5,000 for small businesses in some parts of the UK. And more companies – particularly smaller organisations – are becoming worried about the impact of energy costs on business growth.</p>
<p><strong>Energy cost concerns</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/489147/original/file-20221011-21-4aw4s7.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Line chart showing percentage of responding businesses perceiving energy prices as the main concern, UK (March to October 2022)." src="https://images.theconversation.com/files/489147/original/file-20221011-21-4aw4s7.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/489147/original/file-20221011-21-4aw4s7.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=347&fit=crop&dpr=1 600w, https://images.theconversation.com/files/489147/original/file-20221011-21-4aw4s7.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=347&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/489147/original/file-20221011-21-4aw4s7.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=347&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/489147/original/file-20221011-21-4aw4s7.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=436&fit=crop&dpr=1 754w, https://images.theconversation.com/files/489147/original/file-20221011-21-4aw4s7.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=436&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/489147/original/file-20221011-21-4aw4s7.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=436&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Businesses – particularly smaller firms – polled by the government between February and October 2022 cited rising concerns about energy prices.</span>
<span class="attribution"><a class="source" href="https://www.ons.gov.uk/businessindustryandtrade/changestobusiness/bankruptcyinsolvency/articles/risingbusinessinsolvenciesandhighenergyprices/2022-10-07">Office for National Statistics – Business Insights and Conditions Survey</a></span>
</figcaption>
</figure>
<p>In this <a href="https://www.ft.com/content/8463707c-239a-4944-8d68-058a63e7898d">environment</a>, around 53% of the UK’s small and medium sized enterprises (SMEs or private firms with less than 250 employees) are expected to collapse or reduce their activities, according to <a href="https://www.fsb.org.uk/resources-page/out-in-the-cold.html">the Federation of Small Business</a>.</p>
<p>To address the very real threat of rising energy costs, in September the UK government introduced its <a href="https://www.gov.uk/government/news/government-outlines-plans-to-help-cut-energy-bills-for-businesses">energy bill relief scheme</a> for non-household consumers, including SMEs. For the next six months, the scheme will support businesses whose current gas and electricity prices have increased significantly because of the recent rise in the <a href="https://www.consilium.europa.eu/en/infographics/energy-prices-2021/#:%7E:text=The%20rise%2C%20linked%20to%20the,have%20had%20an%20aggravating%20effect.">global energy prices</a>.</p>
<p>But the scheme might not be enough to help all companies with their energy costs, especially since it will only run for six months initially. Further, it could damage efforts to transition to a more sustainable economy.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/energy-price-freezes-and-business-support-are-sticking-plasters-heres-how-to-protect-uk-families-and-companies-from-future-crises-189406">Energy price freezes and business support are sticking plasters – here's how to protect UK families and companies from future crises</a>
</strong>
</em>
</p>
<hr>
<p>SMEs comprise 99% of the country’s business environment and generate around 60% of its commercial waste as well as more than 43% of its <a href="https://doi.org/10.1016/j.jclepro.2020.123770%20%20%20https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/290998/scho0209bpjq-e-e.pdf">industrial pollution</a>. As such, responsible behaviour by these businesses towards the environment is crucial. </p>
<p>But recent <a href="https://productivityinsightsnetwork.co.uk/app/uploads/2020/10/PIN-DRAFT-FINAL-Report-30-09-2020-RO-TH-1.pdf">research</a> shows the UK government’s green finance policy will mostly benefit large infrastructure projects. This includes the <a href="https://www.local.gov.uk/about/news/cop26-green-economy-could-see-nearly-700000-green-jobs-created-2030">new low carbon sector jobs</a> touted during COP 26 in Glasgow last year and the government’s plan to create a green industrial revolution by boosting offshore wind capacity, <a href="https://www.gov.uk/government/publications/the-ten-point-plan-for-a-green-industrial-revolution/title">among other initiatives</a>.</p>
<p>Given their prevalence on the UK business scene, efforts to maintain the growth of the SMEs must happen alongside support for sustainable green business models to meet government net zero targets. And this must form part of any discussion of the current energy crisis.</p>
<p>Our research into <a href="https://bura.brunel.ac.uk/bitstream/2438/24212/1/FullText.pdf">business recovery</a> following the COVID-19 pandemic showed that relatively small steps can form part of a recovery model for smaller businesses during difficult times for the economy. Based on this research, here are three ways to protect smaller businesses in the current economic downturn.</p>
<h2>1. Consumers: shop local</h2>
<p>Local businesses – on and offline – benefit from our support, as do their surrounding communities. The local economy retains <a href="https://www.theguardian.com/money/2013/dec/06/shop-locally-small-business-saturday-seven-reasons">63p out of every £1</a> spent with an SME, compared to 40p from larger businesses. </p>
<p>Those bigger firms can also reduce their carbon footprint and logistics challenges by sourcing from nearby small companies. The higher revenues generated from this extra business could be used by SMEs to invest in green energy sources to meet their sustainability goals.</p>
<figure class="align-center ">
<img alt="Chalkboard outside a shop that says " src="https://images.theconversation.com/files/489155/original/file-20221011-21-msq3n7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/489155/original/file-20221011-21-msq3n7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/489155/original/file-20221011-21-msq3n7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/489155/original/file-20221011-21-msq3n7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/489155/original/file-20221011-21-msq3n7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/489155/original/file-20221011-21-msq3n7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/489155/original/file-20221011-21-msq3n7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Shop local to support smaller businesses in the community.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/shop-local-saturday-support-your-weirdos-1186603168">Suzanne Tucker / Shutterstock</a></span>
</figcaption>
</figure>
<h2>2. Other businesses: timely payments</h2>
<p>Late payments can have a big impact on a company’s finances, especially when you consider that <a href="https://www.fsb.org.uk/resource-report/chain-reaction-improving-the-supply-chain-experience-for-small-firms.html">77% of SMEs</a> are part of the supply chain of bigger businesses. However, even with the existence of a <a href="https://www.gov.uk/government/news/government-tackles-late-payments-to-small-firms-to-protect-jobs">prompt payment code</a> designed to stop invoicing delays, £23.4 billion of late payments were owed to firms at the start of this year. </p>
<p>The UK’s <a href="https://www.gov.uk/government/news/liz-barclay-named-as-small-business-commissioner-to-lead-crackdown-on-late-payments-to-small-businesses">small business commissioner</a> must be empowered to require timely payments to help smaller businesses survive. The government is currently reviewing the results of a <a href="https://www.gov.uk/government/consultations/increasing-the-scope-and-powers-of-the-small-business-commissioner">consultation</a> on this issue. This will ensure SMEs are financially secure enough to invest in their own businesses, for example by switching to green energy sources.</p>
<h2>3. Government: incentives and support</h2>
<p>Many SMEs use <a href="https://es.catapult.org.uk/news/new-study-finds-85-of-commercial-rented-buildings-face-climate-crunch-due-to-sme-challenge/">rented premises</a>. So, reducing the use of fossil fuels for heating and power means convincing landlords to install renewable energy sources such as solar panels, as well as smart meters and other green technology. More government incentives for landlords could ensure they work with SMEs to secure greener, cheaper and more sustainable energy sources. </p>
<p>And for SMEs that do own premises, the government could introduce green incentives via commercial property tax reductions. A government taskforce could also assist SMEs in reducing and managing fossil fuel consumption, as well as explaining things like how a VAT-registered firm can reclaim energy costs under such a scheme.</p>
<figure class="align-center ">
<img alt="Green traffic light." src="https://images.theconversation.com/files/489158/original/file-20221011-23-b5e9j9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/489158/original/file-20221011-23-b5e9j9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/489158/original/file-20221011-23-b5e9j9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/489158/original/file-20221011-23-b5e9j9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/489158/original/file-20221011-23-b5e9j9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/489158/original/file-20221011-23-b5e9j9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/489158/original/file-20221011-23-b5e9j9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A traffic light system could help direct small business support to where it’s most needed.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/green-traffic-light-arrow-city-while-1774407317">Shotmedia / Shutterstock</a></span>
</figcaption>
</figure>
<p>Any support from government should also be tailored. Using a single initiative to support all SMEs assumes every company is experiencing the energy crisis in the same way. A traffic light system could help to flag the most vulnerable companies. These “red light” firms would get more short-term government support to survive the energy crisis than those in the amber or green groups, for example.</p>
<p>Energy suppliers could also use the traffic light system to modify their business models to support SMEs. For example, suppliers could maintain contracts with red light companies that fail to pay bills if they know the government has promised additional financial support for these businesses. Suppliers could even consider cutting upfront charges for such companies.</p>
<p>This kind of business recovery model will help smaller firms to not only survive the energy crisis, but also to transition to greener sources of heating and electricity, creating more sustainable growth models across this vital sector.</p><img src="https://counter.theconversation.com/content/191188/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Three ways to support smaller businesses in the current economic downturn.Monomita Nandy, Reader in Accounting and Finance; Director of Internationalisation, Brunel University LondonSuman Lodh, Senior Lecturer in Finance, Middlesex UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1870842022-08-22T15:45:25Z2022-08-22T15:45:25ZTips on how to help innovative ideas get wings – from universities to businesses<figure><img src="https://images.theconversation.com/files/478896/original/file-20220812-26-8u32eg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Slowed economic growth and high unemployment <a href="https://www.tralac.org/documents/resources/sadc/4373-sadc-regional-economic-performance-report-for-2020/file.html#:%7E:text=Recent%20data%20indicates%20SADC%20regional,not%20exceeding%205%20per%20cent.">almost seem the norm across Sub-Saharan Africa</a>. There are many factors that has caused this including varying skills levels, low levels of digital literacy and ageing infrastructure. Not to mention the constantly changing technologies that affect the work we do, and how we do it.</p>
<p>Despite these barriers, the private sector is driving economic growth through several innovation strategies. New business areas are being created to compete locally as well as globally. For example, local small and medium sized enterprises (SME) initiatives have seen technology centric start-ups develop new products that have significant impact in local markets. Unsurprisingly, since the pandemic, innovation using advanced technologies has become a top priority in several private sector arenas, including SMEs, to create new markets and products.</p>
<p>Globally, there are huge leaps being made in technological innovation and adaptation. These latest developments have been grouped under the umbrella of the <a href="https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/">Fourth Industrial Revolution</a>.</p>
<p>The key question is how to develop entrepreneurial capabilities for the transfer of these technological innovations to entrepreneurs who can put them into use. This question is important because the entities that develop the basic technology and those that can put it into use are different. </p>
<p>So, how the transfer of technology happens matters.</p>
<p>Several variables – and actions – have to occur for such transfer to happen. They include a concerted effort to share knowledge, skills, technologies or methods to a wider range of potential users who can further develop and exploit the technology. </p>
<p>The transfer of technology doesn’t happen in isolation. In the main, there are three actors involved in the process. They are universities, governments and entrepreneurs.</p>
<p><a href="https://link.springer.com/article/10.1007/s10961-019-09769-2">Our research study</a> looked at how the uptake towards innovation can be supported. We unpacked the ecosystems that can support technology transfer. At the core are certain innovation mechanisms. These can act as a launchpad for technological innovation.</p>
<h2>Supporting the ecosystem</h2>
<p>Technological innovation has experienced exponential growth, drawing further attention on ways to use the opportunities they bring with them. South Africa itself <a href="https://www.dst.gov.za/images/2019/FINAL-White-Paper-to-Cabinet_11-March-2019.pdf">is seeking</a> </p>
<blockquote>
<p>strategies to support the entrepreneurial ecosystem, with universities playing an important role in skills development, research, intellectual property (IP) protection, licensing and spin-offs.</p>
</blockquote>
<p>The reason for these specific kinds of strategic activities is that they produce tangible value. This includes research outputs, business spin-offs, new products, and even optimising value chains through data creation and associated businesses.</p>
<p>This is not only within enterprises, but also in higher education environments. Not surprisingly, strategic activities have been a focal point in technikons and universities, among others. This is because they are tasked with delivering skilled graduates especially <a href="https://www.researchgate.net/publication/249733214_Innovation_in_Innovation_The_Triple_Helix_of_University-Industry-Government_Relations">since</a> </p>
<blockquote>
<p>skill shortages hamper the ability of entrepreneurs to identify technology application potentials and effectively prototype towards viable ventures. </p>
</blockquote>
<p>Also, <a href="https://doi.org/10.1007/s10961-017-9628-2">part of the issue of innovation development is</a> </p>
<blockquote>
<p>insufficient policy coherence and coordination, weak partnerships between actors and a lack of technical and soft skills continue to impede technology transfer.</p>
</blockquote>
<p><a href="https://link.springer.com/article/10.1007/s10961-019-09769-2">Our study</a> found that there are various mechanisms in South Africa that drive innovation outputs by universities as well as in the private sector. We found that these spaces are no longer limited to more elite areas or academic institutions. </p>
<p>We used technology readiness levels to determine what kind of support is needed to ensure the innovation is realised. Technology readiness level is a useful tool to guide decisions, actions and requirements of ventures. It can help determine where an entrepreneur, business, product or service concept is in its lifecycle. </p>
<p>Using this information, the relevant skills and support can be channelled to get their idea either to minimum viable product, to IP/ copyright or to the development of an actual, scalable business.</p>
<p>By assessing the mechanisms in place based on technology readiness levels, we found that there are certain key practices that innovation mechanisms can fulfil to support entrepreneurs. These mechanisms can enhance the ability of entrepreneurs to seize opportunities attributed to the development of the new-generation technologies. </p>
<p>The key practices range from support to engage with these new technologies, to ensuring industry engagements for product with commercial and scalable potential. </p>
<p>This however, depends on expertise and the ability to provide the right advice and leverage the right technology for the right problem. </p>
<p>If well managed, these practices can accelerate the creation of entrepreneurial ventures. They can do this by ensuring a strong collaboration between universities and entrepreneurs on research and development. </p>
<p>This means that innovation spaces offer an early access point to technology innovation. These can emanate from academic research to accelerate the development of entrepreneurial ventures through an array of support resources and services.</p>
<p>So, what do the innovation mechanisms mean for “normal” business people? </p>
<p>If you are struggling to innovate, or at the very least create value from research and development activities, then this these mechanisms can:</p>
<ul>
<li><p>act as a place to channel innovation through collaboration, upskilling, rapid prototyping and consulting services </p></li>
<li><p>can be integrated to bridge gaps like a lack of certain skills, or access to resources. It can also enable the pooling of resources within businesses.</p></li>
</ul>
<p>From a university perspective, such mechanisms can be used to guide SMEs and entrepreneurs in a key aspect of innovation, technology transfer and specifically address <a href="https://doi.org/10.1007/s10961-019-%2009735-y">a lack of necessary skills</a> – both technical (ICT) and soft skills. </p>
<h2>Conclusion</h2>
<p>Our findings show that technology transfer continues to play a pivotal role where strategies to address disruptions of technology require coordinated activities. These mechanisms offer activities to support businesses to innovate. More importantly, they provide practical guidance on how to derive the value part of innovation. Technology transfer lies at the heart of this because it opens the door to IP, copyright or business spin-offs. </p>
<p>Technology transfer can also be integrated into larger institutions to channel innovation activities, pooling expertise from various departments.</p><img src="https://counter.theconversation.com/content/187084/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>There is a useful set of steps to follow to help the transfer of technological innovations to entrepreneurs who can put them into use.Sean Kruger, Manager Business Re-invention, University of PretoriaAdriana Aletta Steyn, Senior Lecturer in Informatics, University of PretoriaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1843712022-06-27T15:35:48Z2022-06-27T15:35:48ZMarket research is essential for entrepreneurs who want their businesses to succeed<figure><img src="https://images.theconversation.com/files/467208/original/file-20220606-14-lklz5d.jpg?ixlib=rb-1.1.0&rect=7%2C4%2C991%2C661&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Secondary market research is the first key step in developing good marketplace intelligence.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>According to the U.S. research and consulting firm <a href="https://www.cbinsights.com/research/start-up-failure-reasons-top/">CB Insights</a>, most entrepreneurs fail because they lack sufficient financing. The second reason they fail is because the market for their product is too small.</p>
<p>Yet many entrepreneurs and coaching professionals continue to reject the market research phase in favour of a “fail fast, pivot quickly” approach. Launching companies this way — even if it means having to adapt to customer feedback later — is very trendy, especially in the world of startups.</p>
<p>However, as the bitter experience of Canadian entrepreneur Tom Zaragoza demonstrates, “learning by doing” is no guarantee that a business will gain traction in the marketplace. In 2017, after months of effort, Zaragoza launched his site Gymlisted to connect private gyms with users, only to find out that there was <a href="https://www.failory.com/interview/gymlisted">no demand for such a service</a>.</p>
<p>Through my activities as a professor in entrepreneurial marketing, I unfortunately meet an increasing number of entrepreneurs who are convinced they have the idea of the century, but who do not take time to study the market in a structured way. Market research remains an essential step for entrepreneurs for the simple reason that if the owner is not a market expert, who is?</p>
<h2>Two misconceptions about market research</h2>
<p>Contrary to the story about the intuitive and visionary entrepreneur, and in a context where modern society applauds action over reflection, it turns out that market research is both essential and relevant — as long as two misconceptions that work against its adoption are removed.</p>
<p><strong>First misconception:</strong> Market research is a linear and rational process that is not compatible with a company’s launch phase.</p>
<p>In reality, it is a set of methods and tools, the goal of which is to create a continuous learning loop by alternating phases of reflection with phases of experimentation. Whatever the size of the company, the approach is much more iterative (achieved through repetition), inductive and diversified than one might think.</p>
<p>As demonstrated by the “<a href="https://www.d-eship.com/en/who-is-bill-aulet">disciplined approach</a>” proposed by Bill Aulet, a professor at MIT, it is actually possible to study a market in a way that is structured and agile. The 24-step process starts with the study of the market fundamentals, an essential first step to understand the market structure and, above all, the different customer segments. Once the target customer is identified, the process unfolds by moving back and forth frequently between research and field studies.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/448631/original/file-20220225-32360-1b0i8eo.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="pictorial representation of the 24 steps of a disciplined approach" src="https://images.theconversation.com/files/448631/original/file-20220225-32360-1b0i8eo.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/448631/original/file-20220225-32360-1b0i8eo.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=587&fit=crop&dpr=1 600w, https://images.theconversation.com/files/448631/original/file-20220225-32360-1b0i8eo.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=587&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/448631/original/file-20220225-32360-1b0i8eo.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=587&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/448631/original/file-20220225-32360-1b0i8eo.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=737&fit=crop&dpr=1 754w, https://images.theconversation.com/files/448631/original/file-20220225-32360-1b0i8eo.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=737&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/448631/original/file-20220225-32360-1b0i8eo.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=737&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A disciplined, 24-step approach for structured and agile market research.</span>
<span class="attribution"><a class="source" href="https://www.d-eship.com/">('Disciplined Entrepreneurship,' by Bill Aulet)</a>, <span class="license">Fourni par l'auteur</span></span>
</figcaption>
</figure>
<p><strong>Second misconception:</strong> Market research is simply about having large samples answer questionnaires.</p>
<p>The truth is, <a href="https://www.bdc.ca/en/articles-tools/marketing-sales-export/marketing/creating-questionnaire">surveys</a> are not a substitute for market research. Contrary to what some business sites advise, a good survey involves using complex methods that require specialized knowledge. The use of free online solutions, such as Google Forms, by inexperienced entrepreneurs often produces biased results that may not be very useful.</p>
<p>In view of these two misconceptions, it would be more appropriate to use the term “market intelligence,” which better translates the two key steps of a pragmatic and agile process adapted to the context of creation.</p>
<h2>The two key steps to develop good market intelligence</h2>
<p><strong>Step 1: Do secondary market research to know your market</strong></p>
<p><a href="https://www.cleverism.com/how-to-perform-insightful-secondary-market-research/">Secondary market research</a> involves exploiting all existing knowledge.</p>
<p>A quick and efficient way to do this is to contact organizations such as <a href="https://www.moremontreal.com/eetp/associationsp.html">professional associations</a>, sector committees or even chambers of commerce. These institutions have the mission of collecting, synthesizing and making accessible relevant and credible information on a given sector or market, often at a very reasonable cost.</p>
<p>This approach allows entrepreneurs to quickly acquire the knowledge they need to start structuring the first hypotheses of their <a href="https://www.desjardins.com/ca/co-opme/business/tip-sheets/market-research-key-step/index.jsp">business model</a>: What are the different customer profiles? What are their expectations and buying habits? What are the competing offers already on the market?</p>
<p><strong>Step 2: Conduct qualitative studies to validate and adjust your business model</strong>.</p>
<p>The next step involves testing and exploring the marketplace on the ground by using <a href="https://www.questionpro.com/blog/qualitative-market-research/">qualitative methods</a>. This type of study takes the form of individual or group interviews, or even simple observations, and makes it possible to deepen the hypotheses put forward following the research phase by directly interviewing those in the field.</p>
<p>Take the example of <a href="https://www.hotel-uniq.com/en">the UNIQ Hotel</a>, an “ephemeral” accommodation launched in 2020.</p>
<p>Initially, studying the reports of the <a href="https://veilletourisme.ca/?lang=en">Tourism Intelligence Network</a> of the Transat Chair of Tourism at the Université du Québec à Montreal and those of <a href="https://www.campingquebec.com/en">Camping Québec</a> showed that this product might interest those who liked “glamping” and wanted both nature and comfort. Indeed, UNIQ offers yurts that can be set up and dismantled in different locations.</p>
<p>During the second phase, it makes sense to do individual or group interviews to understand the customer, their habits, their expectations and any possible obstacles.</p>
<p>This exploration phase makes it possible to understand which services are essential and which booking methods are commonly used.</p>
<p>This type of qualitative research would be an important step in completing the <a href="https://www.youtube.com/watch?v=dgI_aqjH3FQ">value proposition design</a>, a tool that helps illustrate why the idea will meet the market’s expectations. The information also makes it possible to draw up a precise profile of the expected clientele using a “<a href="https://www.socialmediatoday.com/news/what-is-a-buyer-persona-and-why-is-it-important/507404/">buyer persona</a>,” a method for summarizing the main characteristics of future buyers.</p>
<p>Once this exploration phase is complete, one can wrap up with a test to ensure that there is demand for this type of accommodation. This can be done by applying <a href="https://mixwithmarketing.com/2021/09/what-is-concept-testing-with-definition-examples/">concept testing</a>. This simple and inexpensive process consists of submitting a printed or video description of the proposal to the target clientele to study their reactions and their level of intention to make a purchase.</p>
<p>These few good practices do not cover everything, and not all market research methods are applied to every creative context. But as many scientific studies have shown, knowing your market is a key factor of success for any company.</p><img src="https://counter.theconversation.com/content/184371/count.gif" alt="La Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Philippe Massiera ne travaille pas, ne conseille pas, ne possède pas de parts, ne reçoit pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'a déclaré aucune autre affiliation que son organisme de recherche.</span></em></p>The market research stage is often criticized as useless and inappropriate, but it’s essential to success in business.Philippe Massiera, Professeur agrégé en Marketing Management, Université du Québec à Montréal (UQAM)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1822522022-06-08T15:40:11Z2022-06-08T15:40:11ZWhat struggling businesses can do to weather the economic storm<figure><img src="https://images.theconversation.com/files/467716/original/file-20220608-15-mi8ofs.jpg?ixlib=rb-1.1.0&rect=61%2C36%2C4016%2C2090&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/small-business-entrepreneur-female-opening-store-1952118334">Shutterstock/ReeldealHD</a></span></figcaption></figure><p>Rather than rebounding in 2022, economic conditions in the UK have deteriorated. <a href="https://www.imf.org/en/Publications/WEO/Issues/2022/04/19/world-economic-outlook-april-2022%5D">Forecasts</a> for growth in 2022 and the year after have been cut dramatically. </p>
<p>The reasons for this are well documented. Take your pick from soaring energy costs, supply chain disruptions, the impact of COVID-19 and post Brexit difficulties. All of these have led to rising uncertainty. And nor is the UK unique; all G7 economies have had their <a href="https://www.oecd-ilibrary.org/sites/62d0ca31-en/index.html?itemId=/content/publication/62d0ca31-en">growth forecasts cut</a>. </p>
<p>Such a strained economic environment is challenging for everyone. But prospects for small and medium sized enterprises (SMEs) are particularly bleak. </p>
<p>These are the builders, florists, design companies, coffee shops and countless other businesses which provide vital employment, services and tax revenue to the places where we live. There were 5.5 million SMEs in the UK at the <a href="https://www.fsb.org.uk/uk-small-business-statistics.html">start of 2021</a> accounting for 99.9% of all businesses, 60% of UK employment, and around 50% of private sector turnover. </p>
<p>A <a href="https://www.begbies-traynorgroup.com/news/business-health-statistics/critical-corporate-financial-distress-levels-jump-as-cocktail-of-threats-start-to-take-their-toll">recent report</a> suggests the number of businesses in “critical financial distress” is up by 19% in the first quarter of 2022 compared to 2021. Construction (up 51%) and hospitality (up 42%) are the two sectors struggling the most. </p>
<p>Government <a href="https://www.gov.uk/government/statistics/company-insolvency-statistics-january-to-march-2022/commentary-company-insolvency-statistics-january-to-march-2022">data</a> backs this up. Company insolvencies in England and Wales are up 112% for the first three months of 2022.</p>
<p>SMEs as a rule tend to be particularly vulnerable to economic pressures. Typically they do not have large cash reserves and find it difficult and expensive to raise new capital. They also have limited options when it comes to weathering a financial storm. </p>
<p>One obvious and common response is to raise revenue by selling assets and making staff redundant. But <a href="https://www.springerprofessional.de/en/sme-insolvency-bankruptcy-and-survival-an-examination-of-retrenc/17539654">our research</a> challenges this conventional wisdom, and suggests they are not the best route to a business’s survival. </p>
<p>When it comes to selling off assets, the most attractive ones are the most likely to find buyers. A breakdown service, for example, may have no problem selling off its newest recovery truck for a quick cash boost. But holding on to that truck is likely to be key to the business’s long-term survival. </p>
<p>Likewise, we found that cutting labour costs, either by reducing wages or the number of employees is likely to potentially improve cashflow in the short run, but be damaging to morale and reduce the staff expertise required to build recovery in the long term. </p>
<p>A restaurant which lays off its head chef may make an immediate saving on its wage bill, but will also be left without leadership in a critical area when the business environment improves. They may also find that chef difficult to replace if the labour market subsequently becomes more competitive. </p>
<h2>Bespoke approach</h2>
<p>So what does work? We found that the most positive step a business can take to ensure its survival is to reduce debts – not by quickly raising emergency cash, but through careful management. There is wisdom in the “automatic stay” approach, common in many <a href="https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics#:%7E:text=A%20case%20filed%20under%20chapter,court%20approval%2C%20borrow%20new%20money.">insolvency procedures</a>, where a business is granted a period of grace during which their dept payments are paused. </p>
<p>Ultimately, this also benefits the business’s creditors who are more likely to be paid (albeit later than planned) if the business survives than if it fails.</p>
<p>This approach is supported by some in the UK business community, including one insolvency specialist which has <a href="https://bmmagazine.co.uk/news/number-of-firms-in-critical-financial-distress-rises-sharply/">urged the government</a> to extend COVID loan repayment schedules to ease pressure. The Federation of Small Businesses meanwhile, is <a href="https://www.fsb.org.uk/campaign/recovery-ready.html">advising SMEs</a> on steps they can take to deal with problematic debt, which might involve the business owner seeking external expertise – before a court appointed insolvency practitioner becomes involved. </p>
<p>But knowing what to do and what not to do is only part of successful recovery from impending insolvency. The way you do it is also important. </p>
<figure class="align-center ">
<img alt="Car ready to be loaded onto a breakdown lorry." src="https://images.theconversation.com/files/467719/original/file-20220608-302-fs4cf2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/467719/original/file-20220608-302-fs4cf2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/467719/original/file-20220608-302-fs4cf2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/467719/original/file-20220608-302-fs4cf2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/467719/original/file-20220608-302-fs4cf2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/467719/original/file-20220608-302-fs4cf2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/467719/original/file-20220608-302-fs4cf2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Avoid a business breakdown.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/loading-broken-car-on-tow-truck-275048402">Shutterstock/Nejron Photo</a></span>
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<p><a href="https://www.tandfonline.com/doi/abs/10.1080/08985626.2013.870236?journalCode=tepn20">Research suggests</a> that SMEs facing temporary financial distress are better advised by “turnaround” business experts rather than those who specialise in insolvency. Turning a situation around before insolvency occurs requires broader expertise and involves a <a href="https://www.cbi.org.uk/articles/saving-shareholder-value-by-avoiding-insolvency/">sophisticated approach</a> to saving the businesses we all rely on in our day-to-day lives. </p>
<p>It means there is business potential in seeking outside assistance to create a bespoke recovery plan, which takes individual circumstances into account, and carefully designing operational improvements that reduce costs and improve liquidity that don’t endanger a business’ core activity. Businesses should also exploit opportunities to increase revenue and maintain close contact with creditors. </p>
<p>These kinds of timely and specific actions are more likely to gain the support of creditors, employees and customers, on which successful recovery hinges. </p>
<p>SMEs are a vital engine of the economy. But they are also fragile by nature. Financial and tactical support are what many facing temporary difficulties will need – for their sake, and the sake of a much needed wider economic recovery.</p><img src="https://counter.theconversation.com/content/182252/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Naresh R. Pandit does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Selling assets and shedding staff is not the a recipe for survival.Naresh R. Pandit, Professor of International Business, University of East AngliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1694172021-10-12T14:54:21Z2021-10-12T14:54:21ZNigeria’s COVID-19 economic plan has delivered disappointing results: here’s why<figure><img src="https://images.theconversation.com/files/425741/original/file-20211011-13-nz3hin.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Threatened by insecurity, farmers in Nigeria's farm belt are increasingly abandoning their land, leading to higher cost of food </span> <span class="attribution"><span class="source">Photo by Kola Sulaimon/AFP via Getty Images</span></span></figcaption></figure><p>Over a year ago, Nigeria’s President Muhammadu Buhari launched an <a href="https://theconversation.com/buharis-covid-19-economic-plan-old-wine-in-new-wineskins-141079">economic plan</a> designed to mitigate the impact of the COVID-19 pandemic. </p>
<p>Since the outbreak of the pandemic, Nigeria has <a href="https://covid19.who.int/table">recorded</a> 207,618 cases of infection and 2,745 deaths as of October 11, 2021. The economic effects were devastating. Economic growth turned negative in 2020, unemployment and poverty rates increased, and companies went out of business. </p>
<p>Dubbed <a href="https://www.nipc.gov.ng/product/nigeria-economic-sustainability-plan/">“Bouncing Back: Nigeria Economic Sustainability Plan”</a>, Buhari’s COVID-19 plan focused on food security, job creation (especially for young people and women), renewable energy, support for small and medium-size enterprises, manufacturing, infrastructure and social investment. </p>
<p>Cash transfers through <a href="https://nasims.gov.ng/">N-Power</a>, <a href="https://www.marketmoni.com.ng/">MarketMoni</a>, <a href="https://socialprotection.org/discover/blog/tradermoni-empowerment-scheme-nigeria">TraderMoni</a> and other initiatives were cornerstones of the plan. </p>
<p>Now it is time to assess whether the economy has bounced back or is on track to do so. </p>
<p>Prior to the pandemic, the Nigerian economy grew at 2.2% in 2019. It contracted by 1.8% in 2020. It <a href="https://www.imf.org/en/Publications/WEO/weo-database/2021/April/select-subjects?a=1&c=603">rebounded</a> in 2021 with a growth rate of 2.5%. But the rebound was less than expected, considering that sub-Saharan African countries grew at an average rate of 3.4%.</p>
<p>It is unclear whether Nigeria’s growth resurgence is attributable to the economic sustainability plan or to the <a href="https://www.opec.org/opec_web/en/data_graphs/40.htm">increase</a> in the oil price. The price increased from US$41 a barrel in December 2019 to US$67 in December 2020. </p>
<p>Oil is a major driver of growth in Nigeria, accounting for about 65% of government revenue and over 90% of <a href="https://www.cfr.org/blog/amid-oil-price-collapse-nigeria-running-out-foreign-exchange">foreign exchange earnings</a>. In 2010, when the oil price reached a record high of $110, Nigeria’s economic growth was <a href="https://www.imf.org/en/Publications/WEO/weo-database/2021/April/weo-report?c=694,&s=NGDP_RPCH,&sy=2010&ey=2012&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1">11.3%</a>. </p>
<p>Nigeria could <a href="https://www.brookings.edu/blog/africa-in-focus/2018/03/14/figure-of-the-week-gaps-in-nigerias-public-infrastructure/">raise</a> its economic growth by three-fourths of a percent if it improved its low-quality infrastructure.</p>
<p>Political instability also hinders growth. </p>
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Read more:
<a href="https://theconversation.com/nigeria-at-61-a-giant-with-challenging-crises-amid-opportunities-168794">Nigeria at 61: A giant with challenging crises amid opportunities</a>
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<p>## Agriculture and food</p>
<p>The economic sustainability plan prioritised agricultural development and food security. Early indications suggest that this goal is not being accomplished. </p>
<p>Under the <a href="https://statehouse.gov.ng/news/what-you-need-to-know-about-the-nigeria-economic-sustainability-plan/">plan</a>, the government intended to cultivate between 20,000 and 100,000 hectares of new farmland in each of the country’s 36 states. This should have enabled the growth of agriculture value added to hold steady at the 2019 level of 2.4%. But it <a href="https://databank.worldbank.org/reports.aspx?dsid=2&series=NV.AGR.TOTL.KD.ZG">grew</a> by only 2.2% in 2020. </p>
<p>Other African countries had higher rates of agricultural development than Nigeria by the end of 2020. Examples are South Africa (13.1%), Senegal (8.2%), Ghana (7.4%) Angola (6.9%) and Gabon (5.2%). </p>
<p>Given Nigeria’s annual population growth rate of about 2.6%, it means that food supply lagged demand in 2020. This explains the rising food prices. The composite food index <a href="https://www.proshareng.com/news/Nigeria%20Economy/Headline-Inflation-Increases-by-17.38Percent-YoY-in-July-2021--0.37Percent-Lower-Than-June-2021-Rate---NBS/58656">rose</a> by 21% in July 2021. </p>
<p>In his Independence Day speech on 1 October 2021, President Buhari <a href="https://statehouse.gov.ng/news/independence-day-speech-by-president-buhari-on-the-occasion-of-nigeria-61st-independence-anniversary/">blamed</a> hoarders for Nigeria’s food inflation. Yet hoarding typically occurs when demand exceeds supply, and when sellers expect prices to continue to rise. </p>
<p>The antidote to hoarding is a massive increase in agricultural production, which the economic sustainability plan has so far not achieved.</p>
<h2>Small business</h2>
<p>Many of the initiatives under the plan were designed to prevent businesses, especially small and medium scale enterprises, from failing. </p>
<p>The pause in the repayment of loans granted by the Central Bank of Nigeria to the recipients of its intervention programmes was extended by a year. The interest rate on the bank’s loans was cut from 9% to 5%. And the bank created a loan facility of <a href="https://home.kpmg/xx/en/home/insights/2020/04/nigeria-government-and-institution-measures-in-response-to-covid.html">50 billion naira or US$122 million</a> for affected households and small and medium enterprises. </p>
<p>Yet these businesses have continued to struggle for survival. Of the 3,000 enterprises <a href="https://www.ng.undp.org/content/nigeria/en/home/presscenter/pressreleases/2021/20-percent-of-the-fulltime-workforce-in-nigeria-lost-employment-.html">surveyed</a> by the United Nations Development Programme and the National Bureau of Statistics, 80% said they reduced production in 2020. One in three said they knew of at least one business that had closed permanently. About 60% of the firms had endured an unexpected increase in “operational costs”. </p>
<p>In addition to supporting smaller businesses, the Central Bank of Nigeria <a href="https://www.cbn.gov.ng/FeaturedArticles/2021/articles/CBN_Manufacturing.asp">established</a> a 1 trillion naira (US$2.4 billion) facility in April 2020 for supporting manufacturing. Of this amount, 300 billion naira (US$732 million) had been disbursed as of March 2021. </p>
<p>This intervention may have given an impetus to foreign direct investment, which <a href="https://unctad.org/system/files/official-document/wir2021_en.pdf">rose slightly</a> from $2.3 billion in 2019 to $2.4 billion in 2020. This could have been through the provision of loans to foreign manufacturers to establish subsidiaries in Nigeria. And it would have been a positive signal to foreign investors.</p>
<p>COVID-19 interventions increased Nigeria’s manufacturing value added as a percentage of GDP <a href="https://data.worldbank.org/indicator/NV.IND.MANF.ZS?locations=NG">only marginally</a>, from 11.5% of GDP in 2019 to 12.6% in 2020. </p>
<h2>Shallow economic rebound</h2>
<p>The International Monetary Fund expects Nigeria’s economic growth to be flat at about 2.3% for the next two years. By contrast, it is <a href="https://www.imf.org/en/Publications/WEO/weo-database/2021/April/select-subjects?a=1&c=603">estimated</a> that sub-Saharan African countries will grow at an average of 4% during the same period. </p>
<p>This implies that the Nigerian economy is not on track to rebound at a scale needed to significantly reduce the high unemployment and poverty rates. </p>
<p><a href="https://www.ng.undp.org/content/nigeria/en/home/presscenter/pressreleases/2021/20-percent-of-the-fulltime-workforce-in-nigeria-lost-employment-.html">A report</a> by the United Nations Development Programme and the National Bureau of Statistics shows the unemployment rate in Nigeria <a href="https://www.bloomberg.com/news/articles/2021-03-15/nigeria-unemployment-rate-rises-to-second-highest-on-global-list">increased</a> from 27% in the second quarter of 2020 to 33% in the fourth quarter of the same year. Youth unemployment was <a href="https://nigerianstat.gov.ng/">42.5%</a> as of July 2021. The report <a href="https://www.ng.undp.org/content/nigeria/en/home/presscenter/pressreleases/2021/20-percent-of-the-fulltime-workforce-in-nigeria-lost-employment-.html">found</a> that 20% of the workers in the enterprises surveyed lost their jobs in 2020. </p>
<p>The World Bank <a href="https://blogs.worldbank.org/opendata/using-data-combat-ongoing-crisis-and-next-nigeria">estimates</a> that 11 million Nigerians will be pushed into poverty by 2022, in addition to the 100 million (out of 200 million people in the country) who are already classified as poor. </p>
<p>The Nigerian economy would have to <a href="https://data.worldbank.org/indicator/SI.POV.NAHC?locations=NG">grow</a> at between 8% and 10% a year for at least 10 years before the current poverty rate of 40% could be halved. On the current trends, this is very unlikely to happen.</p>
<h2>Poor economic outlook</h2>
<p>With flat economic growth and rising inflation of about <a href="https://www.cbn.gov.ng/">17%</a>, Nigeria risks running into what economists refer to as “stagflation”. Stagflation is a lethal combination of high unemployment and inflation rates. Rising food prices and steep depreciation of the Nigerian currency are the main causes of inflation in Nigeria. </p>
<p>An attempt to rein in <a href="https://www.cnn.com/2021/09/19/investing/stocks-week-ahead/index.html">inflation</a> by raising interest rates would worsen economic growth and increase unemployment. Conversely, a strategy of promoting economic growth by reducing interest rates could push up inflation. </p>
<p>All indications are that Buhari’s COVID-19 plan has not stemmed the worsening unemployment and poverty in Nigeria and has resulted in only marginal improvements in economic growth, manufacturing and foreign direct investment. </p>
<p>The plan was not bold and big enough. There should have been massive investment in agro-processing industries, which would have created jobs for millions of unemployed Nigerian youths. </p>
<p>For <a href="https://www.yemiosinbajo.ng/how-fgs-covid-19-stimulus-package-has-been-helpful-by-osinbajo/">instance</a>, of the 2.3 trillion naira ($5.6 billion) that the government planned to spend on the economic sustainability plan, only 500 billion naira ($1.2 billion), or one-fifth, was spent as of May 2021. </p>
<p>The plan should have focused more on reviving the textile and footwear industries in the country. These industries are labour-intensive, and employed thousands of Nigerians in the 1970s and 1980s. </p>
<p>Transferring cash to a few Nigerians, supporting some small and medium scale enterprises, and saving 2 million jobs <a href="https://www.yemiosinbajo.ng/how-fgs-covid-19-stimulus-package-has-been-helpful-by-osinbajo/">as claimed</a> by the government are inadequate for uplifting the lives of millions of Nigerians who continue to endure prolonged unemployment and extreme poverty.</p><img src="https://counter.theconversation.com/content/169417/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Onyeiwu does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Nigeria’s post COVID-19 economic recovery plan has resulted in only marginal improvements in economic growth, manufacturing and foreign direct investment.Stephen Onyeiwu, Andrew Wells Robertson Professor of Economics, Allegheny CollegeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1650902021-10-06T13:40:57Z2021-10-06T13:40:57ZSouth Africa’s stock exchange for smaller firms: some benefits, but not a magic wand<figure><img src="https://images.theconversation.com/files/417033/original/file-20210819-27-1ud4pk9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>South Africa is home to the largest stock exchange in Africa and the <a href="https://www.jse.co.za/news/news/jse-employees-ranked-top-spots-institute-risk-management-south-africa-awards">20th in the word by market capitalisation</a>. The Johannesburg Stock Exchange (JSE) was established in 1887, during the country’s gold rush. </p>
<p>Well functioning markets are considered preconditions for the financial development of economies. While many African stock markets remain small in terms of market capitalisation, traded value and and turnover, the JSE is an exception. That’s not to say it hasn’t had its fair share of <a href="https://mg.co.za/article/2018-10-05-00-jse-cleans-up-after-scandals">scandals</a> over the years that have dented its credibility.</p>
<p>In 2003, <a href="https://www.african-markets.com/en/stock-markets/jse/jse-welcomes-mettle-investments-to-its-altx-board">the JSE established the JSE AltX</a>, a division for small and medium-sized enterprisess (SMEs) with high growth potential. The aim was to provide them with a platform to access public funding with less stringent criteria than banks and the JSE main board. It was envisaged as helping SMEs improve liquidity and get access to capital markets </p>
<p>However, in <a href="https://uir.unisa.ac.za/handle/10500/28040">my research</a>, much of these promises aren’t fulfilled. </p>
<p>I looked at three categories of companies: those that had delisted, those currently listed and those that have migrated to the main board from 2008 until 2018.</p>
<p>The results paint a not-so convincing picture for growth and sustainability on the alternative stock exchange. </p>
<p>For example, analysis of various ratios that measure growth and sustainability in listed companies show a weak relationship with improved market capitalisation and liquidity. For many delisted, listed and migrated companies, improvement in liquidity, growth, profitability, improved leverage, and sustainability was minimal. </p>
<p>I used these measures because they enabled us to evaluate whether the JSE AltX platform is a catalyst for growth. I found that there was only a 50/50 probability of the JSE AltX playing this role. </p>
<p>For sustainability, the results present a dim picture of participating on the stock exchange. The JSE AltX provides different benefits for various groups of companies. But it should not be thought of as a magic wand.</p>
<p>The insights should be helpful to investors evaluating their investment decisions. And to policy-makers trying to find ways to support initiatives beneficial to high growth potential SMEs. Lastly, it might help the JSE AltX think about how to resuscitate the stock exchange.</p>
<h2>Stock exchanges and SMEs</h2>
<p>The common themes around SMEs – job creation, innovation, economic growth – have attracted a great deal of research. The role of stock exchanges in the performance of SMEs has been less explored. </p>
<p>Stock exchanges ideally provide continuous trading markets, thereby creating liquidity for investments and opportunities for growth. Such a platform could potentially improve SME performance and sustainability, as liquidity is considered a prominent factor in business failure. </p>
<p>The JSE AltX is based on the model used for the UK’s <a href="https://www.chambersstudent.co.uk/legal-practice-areas/capital-markets/the-alternative-investment-market">London Alternative Investment Market (AIM)</a>. It’s considered the most successful alternative exchange in the world. Its listing requirements are less onerous than the main exchange. And no minimum number of shares to be in public hands is required. Nor is a trading record.</p>
<p>To list on the JSE <a href="http://oraclelegalservices.com/wordpress/wp-content/uploads/2012/09/ALTX-LISTING-REQUIREMENTS.pdf">companies have to have</a> at least R25 million share capital, three-year profit history and a minimum pre-tax profit of R15 million. For JSE AltX listings, companies simply require R2 million share capital, no profit history and have no pre-tax limits. These requirements have been <a href="https://www.jse.co.za/issuer-regulation-covid-19">eased even further during COVID-19</a>. </p>
<p>Since its inception, the JSE AltX has had its fair share of successes, as well as failures. </p>
<p>It’s weaknesses include the fact that 40% of companies that had migrated to the main board in 2019 were <a href="https://www.business-standard.com/article/markets/40-sme-companies-that-migrated-to-main-board-now-trading-in-the-red-119042400051_1.html">trading in the red</a>.</p>
<p>In addition, the exchange is characterised by an inability to convert securities into “cash” without affecting its market price – and is perceived as high risk by investors.</p>
<h2>Importance of SMEs</h2>
<p>South Africa suffers from <a href="https://journals.dut.ac.za/index.php/ajims/article/view/893">very high levels of unemployment</a>. Many argue this can be solved by <a href="https://accesstofinancereport.co.za/pdf/INAUGURAL-REPORT.pdf">promoting and supporting SMEs</a> because they are more likely to create employment. </p>
<p>But <a href="https://accesstofinancereport.co.za/pdf/INAUGURAL-REPORT.pdf">research suggests</a> that not all SMEs contribute equally to job creation and economic growth. And that, specifically the SMEs with the highest potential for macroeconomic benefit, including job creation, are those that would list on a stock exchange. For example, high-growth SMEs <a href="https://accesstofinancereport.co.za/pdf/INAUGURAL-REPORT.pdf">created close to 86%</a> of new jobs through businesses less than four years old. </p>
<p>Nevertheless, 75% of SMEs <a href="https://www.mdpi.com/2071-1050/10/7/2527">still fail</a>. This can be attributed to various reasons from talent, skills, and inability to secure funds needed for growth. </p>
<p>It is, therefore, important to understand what makes SMEs achieve sustainable growth. And then the necessary conducive conditions that allow high-potential SMEs to realise their potential need to be created.</p>
<p>While various efforts are made to encourage the establishment of SMEs, sustainability and growth are often constrained by financing. This still remains a major constraint for survival. Factors affecting financing needs may include where in the life cycle an SME finds itself as well as the pace at which the business grows. </p>
<p>High-growth SMEs are likely to have greater requirements for expansion capital and may source funding in the form of equity or loans. But, funding is often biased against SMEs. Ideally, capital should flow from investors to SMEs.</p>
<p>This is where a platform like the AltX can play a role.</p>
<p>So why hasn’t it worked?</p>
<p>For many investors, the less onerous listing requirements of the JSE AltX have created a perception of risk. This has deterred potential investors.</p>
<p>Secondly, many of the JSE AltX’s top performers have migrated to the main board. This has left the platform struggling with companies that don’t perform well. </p>
<p>Thirdly, relaxed listing requirements don’t adequately prepare SMEs for the challenges of a stock market environment. They may also not be considered transparent enough for investors.</p>
<h2>What next?</h2>
<p>To improve its appeal, it could be helpful for the bourse to focus on areas such as listing requirements and efforts to improve the reputation of the JSE AltX.</p>
<p>In future, evaluation of the JSE AltX could benefit from insights from the executive directors of the listed entities. These would provide insider perspectives related to their experience of the stock exchange. This would allow researchers, companies, the JSE AltX and other relevant stakeholders to achieve a better understanding of the performance of the JSE AltX and the expectations for performance, as well as assist in making decisions about listing on the platform. </p>
<p>What we do know so far is that numbers don’t lie.</p><img src="https://counter.theconversation.com/content/165090/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nthabeleng Mmako receives funding from UNISA to execute my study. </span></em></p>There’s no convincing evidence that listing on the alternative stock exchange promotes growth and sustainability for small and medium sized firms.Nthabeleng Mmako, Senior Lecturer in Entrepreneurship, University of South AfricaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1644772021-08-03T14:47:53Z2021-08-03T14:47:53ZCanada’s small businesses could be saved by converting them to co-operatives<figure><img src="https://images.theconversation.com/files/413413/original/file-20210727-21-cwwscj.jpg?ixlib=rb-1.1.0&rect=39%2C0%2C4368%2C2896&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The COVID-19 crisis has demonstrated that our communities must be self-sustaining rather than reliant on volatile global value chains. Co-operatives bring resiliency self-determination to local economies. </span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>Most of Canada’s <a href="https://www.ic.gc.ca/eic/site/061.nsf/eng/h_03126.html#how-SME">1.2 million small- and medium-sized enterprises</a> have been affected by COVID-19. A substantial number of them remain <a href="https://content.cfib-fcei.ca/sites/default/files/2021-02/SME-Debt-and-Profitability.pdf">heavily indebted</a> as pandemic restrictions ease, while <a href="https://economics.td.com/ca-cfib">workforce shortages and supply-chain disruptions</a> are still a problem.</p>
<p>The pandemic has added to the looming succession crisis for these companies due to the growing number of owners nearing retirement who don’t have a formal plan in place for the continuity of their businesses.</p>
<p>This coming succession crunch, part of what’s known as “<a href="https://www.forbes.com/sites/sarazeffgeber/2020/11/28/the-new-silver-tsunami/?sh=472e9bb96d69">the silver tsunami</a>,” was already being <a href="https://content.cfib-fcei.ca/sites/default/files/article/documents/rr3277_0.pdf">discussed by the early 2010s in Canada</a>. Economic experts in <a href="https://nebula.wsimg.com/39cbf55b5770b4a1c05ed7b3f95f32ae?AccessKeyId=980CF231281E274931F9&disposition=0&alloworigin=1">the United States</a> and <a href="https://cadmus.eui.eu/handle/1814/18116">the European Union</a> have also been warning of a similar phenomenon on the horizon for more than a decade.</p>
<figure class="align-center ">
<img alt="A white haired bearded man in a farmer's field with a younger woman looking at a laptop." src="https://images.theconversation.com/files/414348/original/file-20210803-21-304xau.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/414348/original/file-20210803-21-304xau.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=391&fit=crop&dpr=1 600w, https://images.theconversation.com/files/414348/original/file-20210803-21-304xau.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=391&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/414348/original/file-20210803-21-304xau.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=391&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/414348/original/file-20210803-21-304xau.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=491&fit=crop&dpr=1 754w, https://images.theconversation.com/files/414348/original/file-20210803-21-304xau.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=491&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/414348/original/file-20210803-21-304xau.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=491&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The so-called silver tsunami means owners of small- and medium-sized enterprises are pondering succession plans, but few have one in place.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>At stake before the pandemic was <a href="https://content.cfib-fcei.ca/sites/default/files/2018-11/Getting-the-transition-right-succession-planning-report.pdf">$1.5 trillion in business assets</a> and the future of a <a href="https://www.theglobeandmail.com/globe-investor/retirement/the-boomer-shift-how-canadas-economy-is-headed-for-majorchange/article27159892/">large swath of Canada’s workforce</a> because so many Canadians are employed by small- and medium-sized companies.</p>
<p>Overall, Canadian business owners <a href="https://content.cfib-fcei.ca/sites/default/files/2018-11/Getting-the-transition-right-succession-planning-report.pdf">aren’t prepared for succession</a> or for the impacts of crises on their companies. Jobs and the socio-economic well-being of Canadian communities are potentially at risk.</p>
<h2>The co-operative solution</h2>
<p>In Canada, a research team I lead recently published <a href="https://8dcc0d1e-6766-44ed-aac2-decdbe17ca29.filesusr.com/ugd/51eec9_0979bf0c39624ad3bd93fa74efd07643.pdf">a report on succession at these companies</a> and found that business owners first think of transferring their companies to their children or other family members (43 per cent). Retiring owners or those with businesses at risk also seek to sell to third-party investors (24 per cent). </p>
<p>But, as our research also shows, less than half of retirement-aged owners (48 per cent) are familiar with the intricacies of succession, while only 14 per cent have formal succession plans in place. </p>
<p>Another succession option is the strategy of <a href="https://www.oise.utoronto.ca/clsew/UserFiles/File/CoopConvert/1.English-BCCs-evidence_from_the_litterature_-_what_enables_conversion_to_co-operatives_in_canada.pdf">business conversions to co-operatives</a> — selling or transferring companies to employees or other community stakeholders who then <a href="https://canada.coop/wp-content/uploads/2021/05/conversions_to_co-operatives_-_background_information_5_feb._2021_.pdf">create co-operatives</a> and continue the business’s activities.</p>
<p>These converted businesses can take on <a href="https://www.coopconvert.ca/copy-of-about">different member ownership forms</a>, such as worker, consumer, multi-stakeholder or producer co-ops. More than 200 of them, of all these different types, already exist in Canada.</p>
<p>As my earlier research on <a href="https://www.euricse.eu/publications/italys-worker-buyouts-in-times-of-crisis/">Italy’s worker buyouts</a> and <a href="https://www.haymarketbooks.org/books/1585-workers-self-management-in-argentina">Argentina’s worker-recuperated companies</a> has shown, businesses that convert to co-operatives represent a tried-and-true rescue and succession strategy. However, our new study shows that in Canada it’s still <a href="https://atkinsonfoundation.ca/site/uploads/2018/12/AF_CoopPlanningReport_110918-FINAL.pdf">a largely overlooked option</a> by most owners of small- and medium-sized enterprises and employees, unions and policy-makers.</p>
<h2>An overall lack of understanding of co-ops</h2>
<p>The combination of a lack of succession planning and the failure to consider the co-operative-conversion solution is tied to a related finding from our research — only 30 per cent of Canadian small business owners are familiar with co-ops, and many of them have mistaken ideas about them. Those include misconceptions about inefficiency due to the democratic governance of co-ops and assumptions that they lack competitiveness.</p>
<p>Decades of research into the co-operative model’s advantages and strengths shows that these concerns are unfounded. Co-operatives offer <a href="https://fernwoodpublishing.ca/book/cooperatives_in_a_postgrowth_era">stable business models</a> that <a href="https://www.euricse.eu/jeod_articles/invited-paper-worker-cooperatives-good-sustainable-jobs-in-the-community/">provide good jobs</a>. They are often better than conventional businesses in terms of <a href="https://www.ilo.org/wcmsp5/groups/public/---ed_emp/---emp_ent/documents/publication/wcms_108416.pdf">responding to and surviving crises</a> because they <a href="https://neweconomics.org/uploads/files/co-ops-unleashed.pdf">source capital locally rather than with distant shareholders</a>, <a href="https://www.euricse.eu/jeod_articles/editorial-the-cooperative-advantage-for-community-development/">meet local community needs</a>, and <a href="https://www.academia.edu/44641480/Co_operatives_territories_and_social_capital_Reconsidering_a_theoretical_framework">foster trust</a> and mutual aid.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/banking-co-ops-run-by-black-women-have-a-longtime-legacy-of-helping-people-155796">Banking co-ops run by Black women have a longtime legacy of helping people</a>
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<p>During economic downturns, for instance, co-op members will often <a href="https://www.ess-europe.eu/sites/default/files/report_cecop_2012_en_web.pdf">amend wages and revenue distribution rather than lay off employees</a>.</p>
<p>The overall lack of knowledge of the co-op model is not surprising. There is <a href="https://base.socioeco.org/docs/paper-mainstreaming-sse-12-november-2016-edit-untfsse.pdf">systemic bias against solidarity-based economic activity</a> by mainstream economists and business pundits, and a related <a href="https://eric.ed.gov/?id=EJ1132676">lack of co-op content in post-secondary business and economics courses</a>.</p>
<p>At the same time, Canada already has <a href="https://www150.statcan.gc.ca/n1/daily-quotidien/191213/dq191213c-eng.htm">almost 6,000 non-financial co-ops</a>, making up, <a href="https://canada.coop/wp-content/uploads/2021/04/coop_gdp_report_english_web.pdf">according to a recent study</a>, 3.4 per cent of its GDP ($61.2 billion). That’s significantly more than the telecommunication sector’s and mining sector’s 1.8 per cent of GDP respectively, and the auto parts and manufacturing sector’s 0.9 per cent of GDP.</p>
<p>There is no doubt that co-ops are competitive and sustainable businesses. It should then be in the interest of business owners, employees, unions, local communities, as well as policy-makers, to know more about the co-op option for succession and business survival purposes.</p>
<h2>Pathways for conversion to co-ops</h2>
<p>Part of this should include a renewed education campaign about Canada’s already established pathways for businesses to convert to co-ops. Co-operative advocates like the <a href="https://canadianworker.coop/employee-succession-the-co-op-solution/">Canadian Worker Co-op Federation</a> and <a href="https://ontario.coop/business-succession">provincial associations like the one in Ontario</a> have long been leading the way. But business schools and mainstream media need to step up, too. How-to resources and conversion diagnostic tools need to be made readily available, and case studies of the co-op model should be promoted.</p>
<p>Examples of Canadian businesses that have successfully converted to co-ops include Ontario’s <a href="https://www.arontheatre.com/">Aron Theatre Co-operative</a>, <a href="https://www.moonbeamcoop.com/home">Épicerie Co-op Grocery</a>, and <a href="https://arisearchitects.com/">Arise Architects</a>; <a href="https://battleriverrailway.ca/">Battle River Railway</a> in Alberta; and <a href="https://www.glitterbeancafe.com/">Glitter Bean Café</a> in Halifax.</p>
<p>Most of them are in Québec, however, due to <a href="https://chantier.qc.ca/discover-social-economy/definition/?lang=en">favourable social economic policies</a> related to co-op development, the role of unions and labour funds in the conversion process and the unique forms of co-operative businesses found there. </p>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/413416/original/file-20210727-18-1slpfvi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Delivery automobiles with the St-Hubert logo in a parking lot." src="https://images.theconversation.com/files/413416/original/file-20210727-18-1slpfvi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/413416/original/file-20210727-18-1slpfvi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/413416/original/file-20210727-18-1slpfvi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/413416/original/file-20210727-18-1slpfvi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/413416/original/file-20210727-18-1slpfvi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/413416/original/file-20210727-18-1slpfvi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/413416/original/file-20210727-18-1slpfvi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Delivery automobiles are seen at the St-Hubert restaurant in Laval, Québec.</span>
<span class="attribution"><span class="source">Laurent Bélanger/Creative Commons</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
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</figure>
<p>These include <a href="https://community-wealth.org/sites/clone.community-wealth.org/files/downloads/tool-oeoc-multistakeholder-coop.pdf">multi-stakeholder solidarity co-ops</a>, and <a href="https://canadianworker.coop/about/related-types-of-co-ops/">worker-shareholder co-ops</a>, where the worker co-op co-owns the firm with more traditional investors. Examples of conversions to co-ops in Québec include dozens in the <a href="https://www.fcfq.coop/">funeral sector</a>, the <a href="https://fcpq.coop/">ambulance sector</a>, the recently formed newspaper co-op <a href="https://www.ledevoir.com/culture/medias/590335/les-medias-regionaux-de-cn2i-lancent-un-abonnement-numerique">CN2i</a>, and even a <a href="https://www.newswire.ca/fr/news-releases/les-cooperatives-de-travailleurs-dans-la-restauration---un-modele-qui-fonctionne--617809733.html">co-op St-Hubert franchise</a> in Laval.</p>
<p>Canada’s co-ops stepped up to respond to community needs during the COVID-19 crisis more quickly and had immediate local impact compared to government and corporate responses.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/canadas-co-operatives-helping-communities-during-and-after-the-coronavirus-135477">Canada’s co-operatives: Helping communities during and after the coronavirus</a>
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<p>The COVID-19 crisis has demonstrated that <a href="https://www.resilience.org/stories/2020-04-07/comparative-resilience-8-principles-for-post-covid-reconstruction/">our communities must be self-sustaining rather than reliant on volatile global supply chains</a>. Co-ops <a href="https://doi-org.myaccess.library.utoronto.ca/10.1177/0973005221991624">bring resiliency</a> and <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8206912/">self-determination</a> to local economies. </p>
<p>The co-operative model needs therefore to be seriously considered and nurtured as viable responses to closing firms and lost jobs as a result of the pandemic and the looming business succession crunch.</p><img src="https://counter.theconversation.com/content/164477/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marcelo Vieta receives funding from the Social Sciences and Humanities Research Council of Canada (SSHRC) for the Conversion to Co-operatives Project (CoopConvert), which has assisted in funding the research reported on in this article.</span></em></p>The co-operative business model needs to be seriously considered and nurtured as a viable response to closing companies and lost jobs as a result of the pandemic.Marcelo Vieta, Associate Professor, Adult Education and Community Development, Ontario Institute for Studies in Education, University of TorontoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1640742021-07-16T03:17:24Z2021-07-16T03:17:24ZExports and immigrants have masked Australia’s poor R&D record. Here are some simple fixes<figure><img src="https://images.theconversation.com/files/410081/original/file-20210707-19-ul3xx4.jpg?ixlib=rb-1.1.0&rect=0%2C99%2C6016%2C3017&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Joeahead/Shutterstock</span></span></figcaption></figure><p>Australia’s long run of economic growth from the early 1990s to early 2020 inspired much boasting by incumbent politicians.</p>
<p>But behind the hubris and headlines lies a less flattering story — about Australia riding a wave of dumb luck, with exports to China and relatively high levels of immigration masking mundane economic performance.</p>
<p>The most obvious expression of this is investment by Australia’s private sector — overwhelmingly made up of small-to-medium size (SME) enterprises — in innovation. </p>
<p>The sector’s expenditure on research & development — measured as a percentage of GDP — is middling at best. After increasing to match <a href="https://dx.doi.org/10.1787/sti_scoreboard-2017-20-en">the OECD average</a> of about 2.2% in 2008, it slipped to less than 1.8% in 2017. This compares with more than 4% for the two top-ranking nations, Israel and South Korea, and more than 3% for Taiwan, Sweden, Japan and Germany.</p>
<p>But with some fine-tuning of policies and incentives in this area, <a href="https://www.deakin.edu.au/business/research/the-ipa-deakin-sme-research-centre">our analysis</a> suggests the federal government could turn around Australia’s performance on research and development within a decade.</p>
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<strong>
Read more:
<a href="https://theconversation.com/to-become-an-innovation-nation-we-really-need-to-think-smaller-162168">To become an innovation nation, we really need to think smaller</a>
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<h2>We can’t rely on China and immigration</h2>
<p>Australia’s ability to keep relying on booming Chinese demand for minerals and the stimulatory effect of high immigration rates pushing up GDP is unclear at best.</p>
<p>Though exports to China are at <a href="https://www.theaustralian.com.au/business/australian-exports-to-china-surge-to-new-high/news-story/c7546f5d17b136239f40e0c639b36b1b">a record high</a>, this is overwhelmingly due to demand from Chinese steel makers for iron ore, and to a lesser extent wool. By most other measures, however, our relationship with China is troubled. </p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/morrisons-dilemma-australia-needs-a-dual-strategy-for-its-trade-relationship-with-china-162424">Morrison's dilemma: Australia needs a dual strategy for its trade relationship with China</a>
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<p>Housing unaffordability and congestion in our major cities means there will be political pressure to moderate post-COVID immigration rates.</p>
<p>Of all the alternative ways to improve our economic security, the potential of small and medium size businesses to innovate stands out. </p>
<h2>Tax incentives</h2>
<p>Since 2011 the federal government’s primary mechanism to encourage companies to invest in innovation has been its <a href="https://www.ato.gov.au/Business/Research-and-development-tax-incentive/">research and development tax incentive scheme</a>. This provides tax offsets for eligible R&D activities. It has some solid features, in common with schemes in other countries. But the statistics suggest it has not delivered. </p>
<p>Australia’s R&D expenditure as a percentage of gross domestic product (GDP) declined from 2.18% in 2010 to <a href="https://data.oecd.org/rd/gross-domestic-spending-on-r-d.htm">1.79% in 2017</a>. The OECD average from 2000 to 2017 was 2.34%. </p>
<hr>
<p><strong>Business R&D expenditure as a percentage of GDP</strong></p>
<figure class="align-center ">
<img alt="Ausralia private-sector spending on R&D as a percentage of GDP, compared with the OECD average." src="https://images.theconversation.com/files/411363/original/file-20210715-17-ydr7no.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/411363/original/file-20210715-17-ydr7no.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=303&fit=crop&dpr=1 600w, https://images.theconversation.com/files/411363/original/file-20210715-17-ydr7no.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=303&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/411363/original/file-20210715-17-ydr7no.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=303&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/411363/original/file-20210715-17-ydr7no.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=381&fit=crop&dpr=1 754w, https://images.theconversation.com/files/411363/original/file-20210715-17-ydr7no.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=381&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/411363/original/file-20210715-17-ydr7no.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=381&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption"></span>
<span class="attribution"><span class="source">Post COVID Policy Options to Enhance Australia’s Innovation Capabilities Small Business White Paper 2021</span></span>
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</figure>
<hr>
<p>This failure — and the dire implications for Australia’s long-term economic prosperity — prompted our research team to investigate policy fixes. </p>
<h2>How to increase R&D</h2>
<p>One clear area for improvement is businesses tapping into the strong research culture of our world-class universities and other government-funded research organisations. A wealth of Australian expertise remains locked within the walls of our research institutions. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/want-more-research-commercialisation-then-remove-the-barriers-and-give-academics-real-incentives-to-do-it-161355">Want more research commercialisation? Then remove the barriers and give academics real incentives to do it</a>
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<p>Some problems are specific to industries. For example, the government’s R&D incentives have excluded software companies from eligibility for incentives. This has arguably been both unfair and unwise, constraining the growth of a potentially huge local industry — as the success of companies such as Atlassian and Canva demonstrate.</p>
<p>Changes to the tax incentives scheme introduced in July, designed to increase incentives for R&D generally, will have the perverse effect of reducing incentives for many smaller and medium-sized companies in the medium to longer term (more than five years). </p>
<p>But there is cause for hope. Australia’s performance on innovation can be turned around within about ten years through judicious fine-tuning of federal industry policies. </p>
<p>These include: </p>
<ul>
<li><p>reversing the July changes to the R&D tax incentives scheme </p></li>
<li><p>reimbursing R&D offsets quarterly rather than annually, a small administrative change that would help the cash flow of small businesses, enabling them to more readily invest in R&D</p></li>
<li><p>increasing financial incentives to companies for research collaboration with research institutions. </p></li>
</ul>
<p>One idea to encourage collaboration with research institutions is trialling “innovation vouchers”. These provide conditional funding for R&D, being redeemable only through collaborating with a university or other publicly funded research institution. Such vouchers have already been trialled in the UK and the Netherlands, with strong evidence they stimulate R&D activity by small to medium-sized businesses.</p>
<p>These proposals, in combination with others detailed <a href="https://www.deakin.edu.au/__data/assets/pdf_file/0009/2330559/Small-Business-White-Paper-2021.pdf?_ga=2.217535125.2030742933.1626313661-1058862936.1625612647">in our report</a>, could help unlock a potentially rich source of growth and prosperity.</p><img src="https://counter.theconversation.com/content/164074/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Australia’s R&D expenditure as a percentage of gross domestic product has declined over the past decade.George A. Tanewski, Professor in Accounting, Deakin UniversityAndrew Conway, Adjunct Professor Deakin Univeristy & Chief Executive Officer Institute of Public Accountants, Deakin UniversityJames Kavourakis, Research Fellow at the IPA-Deakin SME Research Centre, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1603052021-05-11T14:38:07Z2021-05-11T14:38:07ZWhy Nigerian small businesses aren’t using the full power of social media<figure><img src="https://images.theconversation.com/files/399444/original/file-20210507-17-136cral.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Entrepreneurs at this popular Lagos cane furniture market could do a lot more for their business with the use of social media. </span> <span class="attribution"><span class="source">Photo by Pius Utomi Ekpei/AFP via Getty Images</span></span></figcaption></figure><p>Around the world, the use of social media continues to <a href="https://dazeinfo.com/2017/06/02/rise-of-social-media-e-commerce/">grow</a> and to influence commerce. It offers great benefits for <a href="https://www.digitaldoughnut.com/articles/2018/february/7-reasons-why-social-media-marketing-is-important">marketing businesses</a>. </p>
<p>African businesses, too, could gain from the features and popularity of these platforms, though social media use varies widely between regions of the continent. The <a href="https://gs.statcounter.com/social-media-stats/all/africa">estimates</a> for 2021 are that 45% of the population in northern Africa use social media, 8% in central Africa, 10% in eastern Africa, 16% in western Africa and 41% in southern Africa. </p>
<p>Facebook is the most popular platform in Africa, with <a href="https://gs.statcounter.com/social-media-stats/all/africa">58.74%</a> of social media users. It’s followed by YouTube with 23.01% of users and Twitter with 11.75% of users.</p>
<p>The internet economy – which refers to businesses performed through the worldwide web or internet markets – is <a href="https://pressroom.ifc.org/all/pages/PressDetail.aspx?ID=26066">estimated</a> to contribute close to $115 billion or about 4.5% of the continent’s total gross domestic product. It is <a href="https://www.ifc.org/wps/wcm/connect/publications_ext_content/ifc_external_publication_site/publications_listing_page/google-e-conomy">projected</a> to reach $180 billion or 5.2% of GDP by 2025 and $712 billion by 2050. </p>
<p>Some of the <a href="https://www.sciencedirect.com/science/article/abs/pii/S0007681309001232">reasons</a> for using social media in business relate to its low cost, higher level of communication efficiency and a shift towards a consumer driven environment. But the level of interest in Africa, especially among small scale business owners, is less well understood and evidence is relatively scarce. </p>
<p>Small and medium sized businesses play an important role in the economy of Africa. More than <a href="https://www.intracen.org/uploadedFiles/intracenorg/Content/Publications/Africa_SME%20web.pdf">90%</a> of businesses are in this sector, which employs close to <a href="https://www.intracen.org/uploadedFiles/intracenorg/Content/Publications/Africa_SME%20web.pdf">60%</a> of the continent’s workers. </p>
<p>In a <a href="https://www.tandfonline.com/doi/full/10.1080/08276331.2020.1764732">study</a> in southwest Nigeria, I explored the experiences of small scale craft workers using social media platforms for business. These business owners spoke about the benefits, risks and obstacles involved in using social media. They shed light on what gaps need to be filled before the full potential of social media in commerce can be achieved in Nigeria.</p>
<h2>Craft workers on social media</h2>
<p>I chose 170 craft workers, including dressmakers, goldsmiths, interior decorators, caterers, hair dressers and barbers in the city of Ado Ekiti. Through questionnaires and interviews I sought to gauge their understanding and perception of social media. Over half (55.6%) of the respondents were women; 68% were between the ages of 20 and 29; and 54.1% had tertiary education. </p>
<p>Asked about which social media they were comfortable with, 46% named Facebook, 27.8% WhatsApp, 16.7% Twitter and 9.5% BlackBerry messenger. </p>
<p>Respondents said social media was relevant to business performance. They believed it had improved their business sales and enabled them to communicate with clients. But they felt that it would not improve their business performance on its own. And the number of respondents who actually used it for business purposes was small. They tended to use it for advertising but not for transacting business. While many of the respondents used the platforms when they first started their business, maintaining the tempo became difficult. </p>
<p>Recounting the benefits of using the platforms, most respondents claimed they had met new clients far away from their immediate environment and they had been able to showcase their products online, thus saving the cost of physical showrooms for marketing their wares. </p>
<p>Some of the participants did not see a use for the platforms beyond showing pictures of what they made or did. And there was a lack of consistency in the use of the platforms – respondents stopped using them or used them only once in a while or when clients asked to transact that way.</p>
<p>One participant mentioned the risk of online fraud. Others said social media was expensive, unsafe and restrictive due to connectivity issues. Connectivity issues refer to the ability to get quality and fast internet for business purposes. In the localities of these entrepreneurs, internet speed and quality were bad. Transacting business through social media platforms thus become challenging. Many felt the policy makers and others had not done enough to create a conducive atmosphere for using social media in business transactions. </p>
<p>Small business owners in the study appeared to be getting little from what the digital economy has to offer. Connectivity issues and maintenance costs, limited understanding of the use of social media for business growth and internet security all restricted the use of platforms among the study participants. These issues put together show the gaps that government and others need to fill to provide the infrastructure for small scale entrepreneurs in Nigeria. </p>
<h2>Training, security and costs</h2>
<p>Training and skill acquisition programmes at all levels are essential to impart the full value of social media in business to users.</p>
<p>The issue of internet security needs proper attention. </p>
<p>Service providers may need to create cost effective and user friendly services for small business owners. </p>
<p>All hands must therefore be on deck to ensure that the right atmosphere is created for small business owners, who make up a great part of Africa’s business base.</p><img src="https://counter.theconversation.com/content/160305/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Babatunde J. Omotosho does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Nigerian small business owners highlight the factors that limit full potential of social media use in commerce.Babatunde J. Omotosho, Professor of Sociology, Federal University, Oye EkitiLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1421122020-09-02T14:50:47Z2020-09-02T14:50:47ZSmall and medium growers and innovation are key to South Africa’s citrus export growth<figure><img src="https://images.theconversation.com/files/351519/original/file-20200806-20-hff017.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>While COVID-19 has disrupted many industries, the citrus industry in South Africa has emerged resilient, with strong demand in export <a href="https://www.freshplaza.com/article/9235863/overview-global-orange-market/">markets</a> and strong potential beyond the crisis. To tap this growth potential requires complementary public investment in ports and irrigation infrastructure, and technical capacity to negotiate access to wider export markets on favourable conditions.</p>
<p>Demand for citrus in international markets has boomed under COVID-19 and prices have increased. For example, European prices for South African oranges in May 2020 were 7%-15% higher than a year earlier in euro terms, or around 40% higher in rand <a href="https://www.freshfruitportal.com/european-prices/">terms</a>. The volume of citrus exports from South Africa also grew amid the crisis. They more than doubled in the first four months of 2020 compared to the previous year, accelerating on the long term growth <a href="https://www.trademap.org/">trend</a>.</p>
<p>As reflected in the Citrus Growers’ Association membership, the industry is made up of established white commercial farmers who grow for the export <a href="http://c1e39d912d21c91dce811d6da9929ae8.cdn.ilink247.com/ClientFiles/cga/CitrusGowersAssociation/Company/Documents/CGA-GDC%20Annula%20Report.pdf">market</a> and a smaller number of small and medium-sized black growers. The association established a subsidiary body, the Citrus Growers Development Company, in <a href="https://3b5dca501ee1e6d8cd7b905f4e1bf723.cdn.ilink247.com/ClientFiles/cga/CitrusGowersAssociation/Company/Documents/CGA%20Annual%20Report%20-%202007%20web.pdf">2003</a> to support the small and medium-sized black growers and drive transformation in the industry. These smaller growers accounted for 9% of the total 88,569 hectares planted by citrus <a href="http://c1e39d912d21c91dce811d6da9929ae8.cdn.ilink247.com/ClientFiles/cga/CitrusGowersAssociation/Company/Documents/CGA%20Annual%20Report%202020e.pdf">growers</a> in 2019. Similarly, of the 1,022,948 tonnes of citrus exported in <a href="http://c1e39d912d21c91dce811d6da9929ae8.cdn.ilink247.com/ClientFiles/cga/CitrusGowersAssociation/Company/Documents/2020%20Citrus%20Industry%20Statistics(1).pdf">2019</a>, small and medium-sized growers contributed 8% to the <a href="http://c1e39d912d21c91dce811d6da9929ae8.cdn.ilink247.com/ClientFiles/cga/CitrusGowersAssociation/Company/Documents/CGA%20Annual%20Report%202020e.pdf">total</a>. </p>
<p>Increases in the production and exports of small and medium growers could boost foreign exchange earnings and create jobs in an industry which already directly employs about <a href="https://c1e39d912d21c91dce811d6da9929ae8.cdn.ilink247.com/ClientFiles/cga/CitrusGowersAssociation/Company/Documents/CGA%20AR%202017%20Final.pdf">125,000</a> workers, around 14% of total employment in agriculture. </p>
<p>Greater inclusion of these growers in the higher value export markets is key to sustained growth. Measures to support their inclusion include investments in on-farm infrastructure and to ensure compliance with standards for quality and health (plant and human). The requirements needed to reassure importing countries that they are not at risk of any pests and diseases are the biggest barrier for fresh fruit <a href="https://theconversation.com/south-africa-is-missing-out-on-fresh-fruit-export-growth-what-it-needs-to-do-124391">exports</a>. </p>
<p>The benefits of digitalisation can be harnessed to lower growers’ costs in adopting the necessary standards. For example, the use of blockchain technology through end-to-end data transparency allows all players in the supply chain to access historical and real-time data linked to the product, such as growing conditions, harvest details and transport history. A similar data sharing platform, Phytclean, was developed in South Africa in 2016. The platform captures, stores and reports data on registration and verification of orchards, and phytosanitary records for export <a href="https://static1.squarespace.com/static/52246331e4b0a46e5f1b8ce5/t/5dd630cf41a56d7f7653a757/1574318295632/IDTT+2+Fruit+1+Working+Paper+4+final.pdf">certification</a>.</p>
<p>Collective action by the industry and government is key to unlocking these opportunities to ensure that sustained growth stands on the two legs of <a href="https://iiap.info/">inclusion and innovation</a>.</p>
<h2>Compliance and innovation</h2>
<p>Citrus exports amounted to approximately R20 billion in 2019, up from R6.7 billion in <a href="https://www.quantec.co.za/">2010</a> (around 45% growth in US dollar terms). The growth in exports has been coupled with a corresponding increase in direct jobs in citrus farming from 56,902 jobs in 2009 to 125,000 in 2017, with many more in related <a href="https://c1e39d912d21c91dce811d6da9929ae8.cdn.ilink247.com/ClientFiles/cga/CitrusGowersAssociation/Company/Documents/CGA%20AR%202017%20Final.pdf">activities</a>. </p>
<p>Globally, South Africa is the second-largest exporter of citrus fruit after Spain, accounting for 10% of global exports in <a href="https://www.trademap.org/Index.aspx">2019</a>. As such, the citrus industry represents a success story of labour-intensive and high-value agriculture-led growth. This success requires research and innovation in what can be termed the <a href="https://cup.columbia.edu/book/the-quality-of-growth-in-africa/9780231194761">‘industrialisation of freshness’</a>.</p>
<p>If South Africa pursues wider export markets and supports the growing participation in exporting by small and medium growers then the fruit industry could create <a href="https://theconversation.com/south-africa-is-missing-out-on-fresh-fruit-export-growth-what-it-needs-to-do-124391">an additional 100,000 jobs</a> by 2023. Changes in demand as the world comes out of COVID-19, with an increased emphasis on health, imply sustained stronger demand for citrus products.</p>
<h2>Large farming groups currently dominate</h2>
<p>The main exporters are large farming groups. This partly reflects the investments required to meet the demands and standards of export markets, with the costs of compliance being the responsibility of the exporter. Export requirements include registration and inspection of orchards and packhouses. This is to ensure traceability, good agricultural practices, conformity with product quality and labelling, and compliance with phytosanitary requirements to reduce the risk of quarantine pests and diseases. </p>
<p>Also, being competitive in export markets requires innovation through growing new and improved varieties.</p>
<p>To comply with the many export requirements, larger growers appoint administrators to keep records for compliance with standards and traceability of products. They also pay for audits by certification bodies to show they comply with quality <a href="http://www.citrusresourcewarehouse.org.za/home/document-home/consumer-assurance/quality-standards/daff-export-standards-04-05-18/5339-daff-export-standards-citrus-pt1-general-2018/file">standards</a>.</p>
<p>The industry has developed the technical and science expertise to comply with the requirements for exporting. The challenge is how to include smaller farmers in the systems of exporting to high value markets through collective actions. There have been steps to do this. Seventy-six of the 123 small and medium-sized growers registered with the Citrus Growers Development Company are <a href="http://c1e39d912d21c91dce811d6da9929ae8.cdn.ilink247.com/ClientFiles/cga/CitrusGowersAssociation/Company/Documents/CGA%20Annual%20Report%202020e.pdf">exporting</a> (although this is largely to regional markets). </p>
<p>The majority sell to hawkers and municipal markets or alongside main transport routes. These markets are important and will continue to be supplied. But the opportunity for growth in value is in the export market.</p>
<h2>How to support growers</h2>
<p>Efforts to grow the citrus industry need to focus on widening participation of small and medium-sized growers in export markets. The state and collective action through industry associations are critical to achieve this, not least in the current COVID-19 period.</p>
<p>Small and medium growers face challenges that exclude them from export markets. These include:</p>
<ul>
<li><p>production of poor quality fruit; </p></li>
<li><p>non-compliance with sanitary and phytosanitary standards;</p></li>
<li><p>a lack of irrigation water; and </p></li>
<li><p>a lack of on-farm infrastructure such as irrigation equipment, fencing and packing facilities.</p></li>
</ul>
<p>Government and industry have put in place several initiatives and interventions to address the challenges. These include access to land and input grants. But support tends to be piecemeal. It is also not up to the level that is required by growers to be sustainable. </p>
<p>A focused collaborative approach between industry and government will go a long way to bring the necessary resources to bear to enable small and medium growers to grow exports.</p>
<p>The COVID-19 industry-led initiative to set up an Economic Transformation Programme for black citrus growers by pooling funds across public and private organisations is a huge step in the right <a href="https://cga-gdc.org.za/jobs-fund-application">direction</a>. In addition, the interventions to fund orchard establishment, expansion and rehabilitation, on-farm infrastructure development and skills development will support small-scale growers beyond the COVID-19 crisis.</p>
<p>At an industry level, the government is addressing the challenges of aging and worn out infrastructure at the ports. This will enable faster movement of products through the ports and improved exporting processes. In March 2020, national rail operator Transnet bought new equipment for the Port Elizabeth and Durban ports. These investments need to be sustained beyond COVID-19 as port bottlenecks have been undermining South Africa’s exports in the past 12 <a href="http://www.fruitnet.com/eurofruit/article/181183/rsa-adjusts-to-covid-19-measures">months</a>.</p>
<p>These different measures constitute concrete steps to achieve a ‘land reform for wealth creation’ agenda for small and medium citrus growers, which can be a model for other crops to follow.</p><img src="https://counter.theconversation.com/content/142112/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Simon Roberts has previously received funding from the Department of Trade and Industry for research conducted by the Centre for Competition, Regulation and Economic Development at University of Johannesburg. </span></em></p><p class="fine-print"><em><span>Shingie Chisoro - Dube receives funding from the Department of Trade, Industry and Competition for research conducted by the Centre for Competition, Regulation and Economic Development at the University of Johannesburg. </span></em></p><p class="fine-print"><em><span>Namhla Landani does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Collective action by the industry and government is key to unlocking opportunities for small and medium-sized citrus growers.Simon Roberts, Professor of Economics and Lead Researcher, Centre for Competition, Regulation and Economic Development, UJ, University of JohannesburgNamhla Landani, Economist and Associate Researcher at the Centre for Competition, Regulation and Economic Development, University of JohannesburgShingie Chisoro, Economist/Researcher, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1420642020-08-05T14:38:46Z2020-08-05T14:38:46ZCOVID-19 has hit SMEs in South Africa’s food sector hard. What can be done to help them<figure><img src="https://images.theconversation.com/files/349660/original/file-20200727-37-2ojaec.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">COVID-19 has further emphasised the need for a more diverse food system, in which SMEs play a key role</span> </figcaption></figure><p>COVID-19 has prompted widespread discussion of the resilience of food systems and how efficiency and competitiveness have been previously understood. Recent decades have seen the growth of increasingly complex food value chains. These are underpinned by just-in-time delivery systems, a growing share of food products sold through supermarkets, and increasing concentration of ownership among powerful, large food manufacturers. </p>
<p>The pandemic has further emphasised the need for a more diverse and inclusive food system, in which small and medium sized enterprises (SMEs) play a key role. </p>
<p>As part of a <a href="https://iiap.info/">larger project</a> investigating challenges faced by agro-processing SMEs, we conducted qualitative telephone interviews with 16 SME maize milling and dairy firms during lockdown to gauge the effects of the pandemic.</p>
<p>As essential businesses, food manufacturers continued to operate through lockdown, and it might be assumed COVID-19’s impacts on this industry were minimal. This was not the case. While aggregate production levels were maintained – super maize meal output in April was 25% higher than the same month last year – and consumer prices remained relatively stable, SMEs in these industries faced multiple disruptions throughout their supply chains.</p>
<p>There are still steps that can be taken to shield these enterprises from the worst effects of the pandemic. This should go beyond financial aid and improved access to credit to include, for example, supporting them in diversifying their routes to markets. Such support is critical because the exit of SMEs will exacerbate high levels of concentration and reduce diversity, with consequences for social inclusion and food system resilience. The implications for South Africa’s food system would be far reaching.</p>
<h2>Precarious</h2>
<p>Many agro-processing SMEs were precarious before COVID-19 struck. Power in the South African food system lies with big businesses. In 2017, the 10 largest enterprises <a href="http://www.statssa.gov.za/publications/Report-30-02-03/Report-30-02-032017.pdf">accounted for 72% of revenue</a> in the manufacture of dairy products. In milling, the 10 largest accounted for 76%. </p>
<p>SMEs still play a critical role supplying localised and under-served markets, providing rural employment. They are also important for linkages with other small businesses. Typically they avoid doing business with the big supermarkets due to onerous conditions. Instead they target independent wholesalers and retailers, buyer groups and informal “spaza” shops. They also sell directly to local communities, school feeding schemes and catering. </p>
<p>COVID-19 has reduced SME access to these routes and therefore increased their vulnerability.</p>
<h2>What we found</h2>
<p>During lockdown, supermarkets’ sophisticated distribution systems enabled seamless operations. Panic-buying also diverted sales towards large retailers with higher stock levels. However, our qualitative research interviews found that the retailers relied on by most SMEs were less well-resourced, and faced a range of logistical and operational setbacks, with financial strains resulting in increased defaults on payments to suppliers.</p>
<p>The SMEs reliant on non-retail sales channels were the worst affected. The cessation of school feeding schemes and closure of hospitality and catering had devastating effects on suppliers. All dairy processing SMEs interviewed suffered major sales reductions, of between 20% and 66%. Some millers reported lower revenue, with some closing down entirely. </p>
<p>Switching to supplying mainstream supermarkets was not a feasible alternative. It would have pitted SMEs against large companies. They would also have had to meet higher standards for product quality, packaging, hygiene and traceability. SMEs would have had to accept the mainstream supermarkets’ longer repayment periods, and often onerous rebate and returns policies. Government’s emergency food parcel schemes meanwhile had been supplied by large firms, reflecting longer-standing challenges for SMEs with public procurement.</p>
<p>Perishability of raw materials and close links to farming were a further complicating feature. This was particularly common in the dairy sector in instances where SME processors were backwardly integrated into milk producers. Some started selling surplus raw milk to rivals or plan to retire herds because their normal routes to market were cut. </p>
<p>Milling SMEs faced severe difficulties sourcing raw material. They were also exposed to maize price volatility and the adverse rand-dollar exchange rate movement, given their lesser ability to hedge. Interviewees from both dairy and milling companies also described severe difficulties securing machinery parts, repairs and maintenance services. Compliance with hygiene regulations was a major cost for SMEs in ordinary circumstances. This dramatically escalated with the need to source personal protective equipment and sanitisers at elevated prices.</p>
<h2>The consequences</h2>
<p>Most firms in our sample said they were forced to lay off workers, cut their pay or work reduced hours. Investments that had been planned to improve businesses were halted. </p>
<p>Sadly, government’s business support measures provided insufficient remedy. The top-down approach to support provision, with a fragmented array of schemes, and complex application processes and qualifying criteria, proved confusing or too costly even to firms in need. </p>
<p>The <a href="https://www.ufiling.co.za/uif/">Unemployment Insurance Fund</a> provided a lifeline. Other measures, however, such as the <a href="https://www.sars.gov.za/ClientSegments/Businesses/SmallBusinesses/Pages/default.aspx">tax relief</a>, <a href="http://www.dsbd.gov.za/wp-content/uploads/2020/04/COVID-19-SMME-INTERVENTION-MEASURES.jpg">Department of Small Business Development funds</a> and commercial bank support through the <a href="https://businesstech.co.za/news/banking/395092/south-africas-banks-have-coronavirus-finance-relief-options-but-dont-expect-a-debt-write-off/">loan guarantee scheme</a>, were less accessible. </p>
<p>Notably, firms in difficulty were typically reluctant to take on commercial debt. They argued that despite the loan guarantee scheme, interest rates are prohibitively high. One welcome development in relation to this was the announcement in June’s <a href="http://www.treasury.gov.za/documents/National%20Budget/2020S/speech/speech.pdf">Supplementary Budget</a> of the relaxation of terms and conditions and extension of repayment holidays.</p>
<p>Even without a repeat lockdown, without greater support, many SMEs will fail or be severely weakened in this period of economic disruption. Adaptation is going to require significant and costly changes to business models. </p>
<h2>What could help?</h2>
<p>We see three key actions that could help. </p>
<p>First, there should be commitments by the major retailers to offer SMEs preferential shelf space and to introduce local procurement policies at preferential terms. </p>
<p>Second, alternative routes to market need to be strengthened. This can involve improving infrastructure and implementing regulations that enable SMEs to operate in the peri and non-urban areas. Public procurement can also provide SMEs with consistent revenue streams but needs to be reconfigured to accommodate SMEs’ needs. Delays by the state in paying SMEs and often complex and dysfunctional tendering processes remain a big problem. The expansion of inclusive e-commerce platforms for retail and digital management of food logistics and sales can help SMEs access multiple new routes to market. But this requires state support to build firms’ digital capabilities. It also requires policies and regulations to create a competitive digital space and curb the market power of dominant platforms.</p>
<p>Thirdly and finally, there should be improved short-term emergency support, with streamlined application processes and broadened access conditions. Commercial bank loans are inappropriate for SMEs in severe difficulties, and grant finance should be more easily available. Government should also provide assistance with personal protective equipment and sanitisers, in addition to training and advice on how to adapt to new requirements. </p>
<p>In the longer term, South Africa needs to consider how markets may undermine inclusive food systems through ‘<a href="https://www.harpercollins.com/products/competition-overdose-maurice-e-stuckeariel-ezrachi">toxic competition</a>’. The country needs to rethink ‘market shaping’ policies and value chain governance to emphasise the critical role of the state and collective action.</p><img src="https://counter.theconversation.com/content/142064/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew Bowman receives funding from the Economic and Social Research Council (UKRI) (ES/S0001352/1). </span></em></p><p class="fine-print"><em><span>Reena das Nair is a Senior Researcher at the Centre for Competition, Regulation and Economic Development (CCRED). CCRED receives project-based funding from multiple sources including the Department of Trade, Industry and Competition, the United Nations World Institute for Development Economics Research (UNU-WIDER) and the Economic and Social Research Council (UKRI) (ES/S0001352/1).</span></em></p>South Africa’s food system is dominated by big firms, leaving small businesses to supply localised and under-served markets, and provide rural employment. It needs to be inclusive and diverse.Andrew Bowman, Lecturer in Africa and International Development, The University of EdinburghReena das Nair, Senior Researcher, Centre for Competition, Regulation and Economic Development, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1371042020-04-24T12:50:07Z2020-04-24T12:50:07ZChinese start-ups are being starved of venture capital – with worrying omens for the west<p>Through the centuries, China’s entrepreneurs accessed finance from family and friends through social networks known as <em>guanxi</em>. Even after the communist revolution, these networks helped to propagate a thriving small business sector that invested in local services and basic manufactured goods. </p>
<p>In the late 1970s and 1980s, when President Deng Xiaoping <a href="https://qz.com/1498654/the-astonishing-impact-of-chinas-1978-reforms-in-charts/">started to</a> open up the economy, it didn’t take long to rekindle the innate entrepreneurial spirit that saw China’s traders conquer the old Silk Road. Following the ascendance of tech juggernauts Alibaba, Tencent and Baidu, coupled with <a href="https://nationalinterest.org/feature/china%E2%80%99s-political-economy-after-40-years-reform-38377">later market liberalisations</a>, there has been an explosion of both local and western venture capitalists eager to find the next generation of <a href="https://medium.com/startup-grind/unicorns-dragons-and-fairy-dust-demystifying-investors-venture-capital-d0f6e5567f30">Chinese unicorns</a>.</p>
<p>China now <a href="https://link.springer.com/article/10.1007/s11187-017-9972-5">has the</a> largest venture capital market in Asia, second only to the US worldwide. This is all the more extraordinary given that the communist Chinese constitution did not formally recognise the legitimacy of private enterprise until 1988. </p>
<p>In the wake of the COVID-19 pandemic, however, this vitally important source of finance for entrepreneurs was always likely to be under serious threat. Unlike banks, which can make decisions about business lending using automated credit scoring, venture capitalists and angel investors rely on meeting entrepreneurs face to face to judge whether their start-ups are investable. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/330118/original/file-20200423-47788-1geek8w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/330118/original/file-20200423-47788-1geek8w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/330118/original/file-20200423-47788-1geek8w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/330118/original/file-20200423-47788-1geek8w.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/330118/original/file-20200423-47788-1geek8w.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/330118/original/file-20200423-47788-1geek8w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/330118/original/file-20200423-47788-1geek8w.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/330118/original/file-20200423-47788-1geek8w.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">So 2019.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/young-asian-business-people-shaking-hands-406835593">imtm photo</a></span>
</figcaption>
</figure>
<p>Because China was the first country to be adversely affected by COVID-19, we <a href="https://www.st-andrews.ac.uk/business/rbf/workingpapers/RBF20_008.pdf">decided to examine</a> how this sector has been affected. This, we hoped, would help gauge what is likely to be happening to other economies now in economic meltdown. The results are not pretty.</p>
<h2>What we found</h2>
<p>We discovered that since the outbreak of the coronavirus in China, there has been a dramatic decrease in aggregate levels of investors taking stakes in new businesses. Across the full spectrum of venture capital, from investments in brand new companies to those that are already profitable, we found a 60% decline in the first quarter of 2020 compared to 2019. </p>
<p>To put this into perspective, <a href="https://www.tandfonline.com/doi/pdf/10.1080/13691060903184803?casa_token=cPcByQi7OTcAAAAA:PlP3YCfr3xk1mmU_blpuGP0TWppI5QwF4FDYWOBzP4vRv-MB5colOBooMlZ1SpQGzJ4Tt1nLSlAR">this is three times</a> the size of the decrease during the global financial crisis of 2007-09. Some <a href="https://venturebeat.com/2020/04/01/startup-genome-the-coronavirus-is-hurting-global-startup-investments/?mc_cid=91ef797a9c&mc_eid=ea0e001cad">estimate that</a> if a drop like this were to happen globally, approximately US$28 billion (£23 billion) in start-up funding could be lost. </p>
<p>When we looked at seed-stage investments – those typically dominated by the smallest and youngest start-ups – they almost totally disappeared in China during the first quarter of the year. There were fewer than 20 deals in total, representing an 86% reduction year on year. In other words, start-ups during this crisis have been all but starved of new finance. </p>
<p><strong>China seed-stage funding 2015-20</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/330069/original/file-20200423-47788-fzoqod.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/330069/original/file-20200423-47788-fzoqod.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/330069/original/file-20200423-47788-fzoqod.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=296&fit=crop&dpr=1 600w, https://images.theconversation.com/files/330069/original/file-20200423-47788-fzoqod.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=296&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/330069/original/file-20200423-47788-fzoqod.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=296&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/330069/original/file-20200423-47788-fzoqod.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=371&fit=crop&dpr=1 754w, https://images.theconversation.com/files/330069/original/file-20200423-47788-fzoqod.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=371&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/330069/original/file-20200423-47788-fzoqod.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=371&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.st-andrews.ac.uk/business/rbf/workingpapers/RBF20_008.pdf">Ross Brown and Augusto Rocha</a></span>
</figcaption>
</figure>
<p>The sectors that benefit most from seed funding in China are education, e-commerce, media and entertainment, healthcare and AI/robotics. Most of the money comes from local Chinese investors, and this is probably a good barometer of the areas of the economy worst affected by the crisis – education and entertainment above all. </p>
<p>In contrast, larger later-stage venture capital deals are being less adversely affected. This may be because many deals are funded by investors that are foreign-owned, often from places only hit by the pandemic later in the quarter. Significant foreign-owned investors include <a href="https://www.sequoiacap.com/">Sequoia</a> of the US, Japan’s <a href="https://www.softbank.jp/en/">Softbank</a> and the UK’s <a href="https://www.bailliegifford.com/en/uk/about-us/">Baillie Gifford</a>, as well as sovereign funds like the <a href="https://www.qia.qa/">Qatar Investment Authority</a>. </p>
<p>We also examined which areas in China were most negatively affected. Traditionally, entrepreneurial finance was concentrated in Beijing, Shanghai and Shenzen, though in recent years, investors spread their nets across the country. Now, however, there appears to be a worrying retrenchment. Some provinces seeing the greatest decreases in investment are the same ones worst affected by the virus – Hubei, Zhejian and Hunan. </p>
<p><strong>Worst affected provinces, Q1 2020 vs Q1 2019</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/330096/original/file-20200423-47799-10b1v91.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/330096/original/file-20200423-47799-10b1v91.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/330096/original/file-20200423-47799-10b1v91.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=423&fit=crop&dpr=1 600w, https://images.theconversation.com/files/330096/original/file-20200423-47799-10b1v91.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=423&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/330096/original/file-20200423-47799-10b1v91.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=423&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/330096/original/file-20200423-47799-10b1v91.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=532&fit=crop&dpr=1 754w, https://images.theconversation.com/files/330096/original/file-20200423-47799-10b1v91.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=532&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/330096/original/file-20200423-47799-10b1v91.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=532&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.st-andrews.ac.uk/business/rbf/workingpapers/RBF20_008.pdf">Ross Brown and Augusto Rocha</a></span>
</figcaption>
</figure>
<h2>The UK situation</h2>
<p>The UK <a href="https://www.wired.co.uk/article/brexit-london-venture-capital-startups">relies more on venture capital</a> than most European countries, so our Chinese data begs important questions about what is happening closer to home. From our analysis, we detect a marked drop in entrepreneurial finance in the first quarter of 2020. Like China, the youngest and smallest start-ups are the ones most affected by the crisis, though other stages of the investment process have been hit too. </p>
<p><strong>UK seed funding, 2015-20</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/330072/original/file-20200423-47820-1f3lhnf.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/330072/original/file-20200423-47820-1f3lhnf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/330072/original/file-20200423-47820-1f3lhnf.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=248&fit=crop&dpr=1 600w, https://images.theconversation.com/files/330072/original/file-20200423-47820-1f3lhnf.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=248&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/330072/original/file-20200423-47820-1f3lhnf.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=248&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/330072/original/file-20200423-47820-1f3lhnf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=312&fit=crop&dpr=1 754w, https://images.theconversation.com/files/330072/original/file-20200423-47820-1f3lhnf.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=312&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/330072/original/file-20200423-47820-1f3lhnf.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=312&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.st-andrews.ac.uk/business/rbf/workingpapers/RBF20_008.pdf">Ross Brown and Augusto Rocha</a></span>
</figcaption>
</figure>
<p>From the chart above, the number of seed-funding transactions in the UK actually halved between the first quarter of 2018 and the first quarter of 2020. It could be that this was initially due to uncertainties caused by Brexit, then accentuated by the pandemic. </p>
<p>We can safely assume that the figures for the second quarter of 2020 will show further dramatic declines. The uncertainty suffocating entrepreneurial activity in the UK has already had a massive impact on the economy. <a href="https://www.enterpriseresearch.ac.uk/uk-companies-facing-covid-19-pincer-movement-data-shows/?mc_cid=f733214c4d&mc_eid=ea0e001cad">Early figures show</a> that the number of firms going bankrupt in March was 70% higher than the same month last year, while registrations of start-ups fell by a quarter. Clearly this crisis is unlike any in modern times. </p>
<p>The UK government has just <a href="https://www.gov.uk/government/news/billion-pound-support-package-for-innovative-firms-hit-by-coronavirus?mc_cid=f733214c4d&mc_eid=ea0e001cad">launched a</a> suite of support packages including the £500 million Future Fund and a £750 million fund to target support for innovative small and medium-sized enterprises (SMEs). Importantly, these schemes depend on co-investments between the private sector and the public sector, which may mitigate the declines in private equity investment. But as long as venture capitalists and business angels are unable to physically meet up with entrepreneurs, this kind of finance is likely to continue to be thin on the ground.</p><img src="https://counter.theconversation.com/content/137104/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>China rose to become the second biggest market for venture capital in the world. Then came COVID-19.Ross Brown, Professor in Entrepreneurship and Small Business Finance, University of St AndrewsAugusto Rocha, Research Fellow in Entrepreneurship and Technology Exploitation, University of St AndrewsLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1309042020-02-03T15:36:59Z2020-02-03T15:36:59ZWhy some green policies can actually harm progress on climate change<figure><img src="https://images.theconversation.com/files/313311/original/file-20200203-41481-1sypuu3.jpg?ixlib=rb-1.1.0&rect=0%2C162%2C5253%2C3462&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://unsplash.com/photos/RkIsyD_AVvc">Paweł Czerwiński/Unsplash</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>You’d be forgiven for thinking that businesses are racing ahead in the green transition. After all, big corporations like Sainsbury’s and Microsoft have made public announcements about going <a href="https://www.bbc.co.uk/news/business-51263991">carbon neutral</a>, or even <a href="https://www.theguardian.com/technology/2020/jan/16/microsoft-carbon-emissions-negative-2030">carbon negative</a> in the near future.</p>
<p>But these commitments are more difficult for small-to-medium enterprises (SMEs) to implement. Comprising fewer than 250 employees, they make up <a href="https://www.fsb.org.uk/uk-small-business-statistics.html">99.9% of all businesses</a> in the UK. Fully 96% have nine or fewer employees. They have fewer resources to carry out new policies and so are often left behind. SMEs might struggle to afford the upfront cost of installing renewable energy technologies like solar panels, and they might lack the time or personnel to find ways to reduce their energy use and emissions. This leaves them <a href="https://www.scottishpower.co.uk/small-business/news/carbon-trust-partnership">paying unnecessarily high energy bills</a> or <a href="https://www.irishtimes.com/business/smes-lack-the-time-and-money-to-embrace-green-energy-seai-1.3839441">contributing more than their share of CO₂ emissions</a>. This is not a fault of the policies themselves, but it does show the government’s lack of consideration of the challenges that small businesses face in trying to make the necessary changes.</p>
<p>I study low carbon technology and help SMEs in Liverpool and Lancashire to implement it. These companies are hit by levies and tariffs that are meant to incentivise more sustainable practices, but many lack the time and resources to implement them. As a result, they’re penalised, which further limits their capacity to catch up.</p>
<h2>Heating</h2>
<p>Over one-third of the UK’s greenhouse gas emissions come from <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/140095/4093-emissions-heat-statistical-summary.pdf">heating buildings</a>. Speedily deploying renewable heating – using technology like electric heat pumps – is essential for meeting the 2030 target of <a href="https://www.theguardian.com/environment/2016/jun/30/uk-sets-ambitious-new-2030s-carbon-target">reducing emissions by 57% from 1990s levels</a>. Why then do Energy Performance Certificate ratings continue to <a href="https://www.yorkshireenergysystems.co.uk/epcandheatpumps/">discourage customers</a> from installing heat pumps?</p>
<p>These ratings calculate how energy-efficient a building is to heat. Every home that is rented, sold or assessed is required to produce a certificate. Data about the building’s construction, such as the wall materials and levels of insulation, is fed into an algorithm that is supposed to help the government measure the progress of its energy-efficiency policies. But the underlying assumption within this algorithm is that electricity is more expensive than gas, and <a href="https://www.sciencedirect.com/science/article/pii/S0301421519301867">electric heating will greatly increase electricity use</a>. There is some truth in that, but emissions from electricity generation will decrease as the electrical grid is decarbonised. Gas powered appliances meanwhile will always result in the same emissions.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/313305/original/file-20200203-41507-1h0igqf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/313305/original/file-20200203-41507-1h0igqf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/313305/original/file-20200203-41507-1h0igqf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/313305/original/file-20200203-41507-1h0igqf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/313305/original/file-20200203-41507-1h0igqf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/313305/original/file-20200203-41507-1h0igqf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/313305/original/file-20200203-41507-1h0igqf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Energy performance certificates rate the efficiency of appliances to help consumers decide which is the best for the environment and their energy bills.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/energy-efficiency-concept-rating-chart-365270297">MPanchenko/Shutterstock</a></span>
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<h2>Recycling</h2>
<p>A plastic bag charge may seem like a simple method for reducing use. After all, people would prefer not to pay for something that they can bring from home. Still, there are worrying side effects to this policy.</p>
<p>For instance, there are relatively higher emissions from the <a href="https://digitalcommons.morris.umn.edu/cgi/viewcontent.cgi?article=1002&context=urs_2017">manufacture of single-use paper bags</a> and <a href="https://www.npr.org/sections/money/2019/04/09/711181385/are-plastic-bag-bans-garbage">an increase in heavier bags making their way to landfill</a> because people are no longer reusing the flimsier free shopping bags for their bins. Instead, they’re buying rolls of heavy bin bags. Heavier loads on vans transporting rubbish means higher emissions.</p>
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Read more:
<a href="https://theconversation.com/are-retailers-bagging-the-5p-plastic-carrier-bag-charge-118462">Are retailers 'bagging' the 5p plastic carrier bag charge?</a>
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<p>Businesses in the UK that produce packaging will also <a href="https://www.gov.uk/government/consultations/plastic-packaging-tax">be hit with a levy after April 2022</a> if their products are not at least 30% recycled material. But what about businesses with a circular system which means they reuse their packaging and skip the <a href="https://www.channel4.com/news/factcheck/is-recycling-worth-it">heavily polluting</a> recycling stage altogether? As it is, these businesses will face the levy too.</p>
<h2>Communication</h2>
<p>A small business looking to be more sustainable would do well to ban paper communication. But there’s no guarantee that relying on emails is a big improvement. Most people don’t associate texts, emails and unnecessary attachments with a carbon cost, but our internet use also has emissions. </p>
<p>The <a href="https://carbonliteracy.com/">Carbon Literacy project</a> estimates that every spam email emits approximately 0.3g CO₂e (carbon dioxide equivalent). An email with “long and tiresome attachments” emits approximately 50g CO₂e. The average office worker produces <a href="https://carbonliteracy.com/the-carbon-cost-of-an-email/">1.652kg CO2e per day</a> in emails alone. </p>
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<img alt="" src="https://images.theconversation.com/files/313306/original/file-20200203-41485-1efx4cu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/313306/original/file-20200203-41485-1efx4cu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/313306/original/file-20200203-41485-1efx4cu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/313306/original/file-20200203-41485-1efx4cu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/313306/original/file-20200203-41485-1efx4cu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/313306/original/file-20200203-41485-1efx4cu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/313306/original/file-20200203-41485-1efx4cu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The carbon footprint of email is less intuitive than the environmental impact of relying on paper communication.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/closeup-woman-hand-using-laptop-pc-646100272">Oatawa/Shutterstock</a></span>
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</figure>
<h2>Transit</h2>
<p>Installing energy-saving lightbulbs and energy efficient boilers will help a business reduce its emissions. But often the impact of energy use is eclipsed by something few people even count – the emissions from employees commuting to work every day.</p>
<p>Setting up a work-from-home policy or arranging virtual meetings where possible would be a cheap and effective way for an SME to address their emissions quickly. For a big company like Sainsbury’s, pressuring local councils to make public transport more affordable and accessible would go even further to bring down emissions for local businesses and the wider community.</p>
<p>To help businesses go zero carbon, or even carbon negative, policies must be adaptable and developed with community input. None of the policies I mention are innately bad – many of them quite work well in some places. But more important than any single policy is an overarching strategy to decarbonise society and the economy. Without monitoring the effects of each decision or making an effort to consider unintended consequences, governments can do more harm than good.</p>
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<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/263883/original/file-20190314-28475-1mzxjur.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/263883/original/file-20190314-28475-1mzxjur.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=140&fit=crop&dpr=1 600w, https://images.theconversation.com/files/263883/original/file-20190314-28475-1mzxjur.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=140&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/263883/original/file-20190314-28475-1mzxjur.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=140&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/263883/original/file-20190314-28475-1mzxjur.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=176&fit=crop&dpr=1 754w, https://images.theconversation.com/files/263883/original/file-20190314-28475-1mzxjur.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=176&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/263883/original/file-20190314-28475-1mzxjur.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=176&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p><em><a href="https://theconversation.com/imagine-newsletter-researchers-think-of-a-world-with-climate-action-113443?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKengagement&utm_content=Imagineheader1130904">Click here to subscribe to our climate action newsletter. Climate change is inevitable. Our response to it isn’t.</a></em></p><img src="https://counter.theconversation.com/content/130904/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ariel Edesess works in the LoCal-i project for Lancashire, a sister project to the Low Carbon Eco-Innovatory for the Liverpool City Region, an ERDF funded group within Liverpool John Moores University. </span></em></p>Taxes designed to encourage a green transition can instead penalise smaller businesses and ensure they’re left behind.Ariel Edesess, Postdoctoral Researcher in Low Carbon Technology, Liverpool John Moores UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1308712020-01-31T05:07:16Z2020-01-31T05:07:16ZDisaster hits small business in many ways. We need a national strategy to help them adapt<p>When the central business district of Lismore was flooded in 2017, every small business owner in the northern New South Wales town had a decision to make.
Should they rebuild their businesses, or take whatever insurance money they might get and move on? </p>
<p>I know one who contemplated giving it all away. His shop had been completely inundated. What was the point, he wondered, if it could all happen again in another few years?</p>
<p>He did decide to rebuild, though. More than that, he resolved to build back better, to be better prepared for the next flood. He replaced water-damaged carpets with marine grade carpet, and plasterboard with concrete. He had shelving attached to hoists, and other cupboards on wheels.</p>
<p>In the wake of this season’s bushfires, many small businesses will face the same decision – whether to rebuild, and then how to “build back better”. It’s a question that should also be getting attention in the national capital from public servants and political leaders.</p>
<h2>Preparing for future risks</h2>
<p>This week Prime Minister Scott Morrison <a href="https://www.pm.gov.au/media/address-national-press-club">spoke about the need</a> to “prepare for and adapt to the environment and the climate we are going to be living in”. </p>
<p>“Building back better” is a crucial part of increasing resilience. It is one of the four key principles of the United Nation’s <a href="https://www.undrr.org/implementing-sendai-framework/what-sf">framework for disaster risk reduction</a> (endorsed in Sendai, Japan, in 2015). It stresses the benefit of using the post-disaster recovery and reconstruction phase to better prepare for future risks. </p>
<p>For a small business, doing so just isn’t just about restoring a premises that might have been destroyed or damaged. Building back better means looking at the business in its totality. This includes relationships with suppliers, customers and staff. </p>
<p>In this regard, building back better should be something done by every small business in a community affected by a disaster. Because all businesses tend to be affected indirectly even if they don’t have to deal with a direct impact. We have seen just how far and wide those indirect effects are in recent weeks, with businesses that depend on tourism <a href="https://www.sbs.com.au/news/tourism-industry-suffers-as-bushfire-images-scare-off-international-travellers">facing a downturn</a> despite not being in a fire-ravaged area.</p>
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<strong>
Read more:
<a href="https://theconversation.com/celebrity-concern-about-bushfires-could-do-more-harm-than-good-to-help-they-need-to-put-boots-on-the-ground-129627">Celebrity concern about bushfires could do more harm than good. To help they need to put boots on the ground</a>
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<h2>Economic costs</h2>
<p>Just as it costs more to <a href="https://theconversation.com/a-crisis-of-underinsurance-threatens-to-scar-rural-australia-permanently-129343">replace a home destroyed in a bushfire</a> with a building whose design and a materials are more fire-resistant, it take more resources for a small business owner to build back better.</p>
<p>Nor are the costs just financial – getting expert advice plans, finding skilled tradespeople and so on. There are emotional pressures too. There can be a strong motivation to put things back just as they were not just because it seems the quickest route to getting back to normal – and to that all-important cash flow – but also because it is psychologically less taxing. </p>
<p>In the ten years to 2016, the total economic cost of natural disasters in Australia averaged A$13.2 billion a year, according to 2017 modelling by Deloitte Access Economics for the <a href="http://australianbusinessroundtable.com.au/assets/documents/ABR_building-resilience-in-our-states-and-territories.pdf">Australian Business Roundtable for Disaster Resilience & Safer Communities</a>. It projects the economic cost to grow to A$39 billion a year in 2050.</p>
<p>The small business sector disproportionately shoulders these costs, with significant personal and social consequences. If a business in a small town fails to reopen, it create a vicious cycle, reducing trade for neighbouring businesses and hurting the prosperity of the local community. Throughout regional Australia there are examples of small communities – such as <a href="https://www.abc.net.au/news/2015-01-12/black-saturday-infrastructure-marysville-cautionary-tale-sa-fire/6013114">Marysville, Victoria</a> – that never really recovered from past disasters.</p>
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<strong>
Read more:
<a href="https://theconversation.com/we-can-learn-a-lot-from-disasters-and-we-now-know-some-areas-dont-recover-71008">We can learn a lot from disasters, and we now know some areas don't recover</a>
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<p>Despite how important small businesses are to the economy, and in particular to the prosperity of regional and rural communities, government recognition of the need to assist them remains a work in progress. </p>
<p>For the current bushfire crisis, the federal and relevant state governments are <a href="https://www.business.gov.au/news/bushfire-support#small-business-recovery-package">offering small business</a> “recovery grants” of up to A$50,000 and “concessional loans” of up to A$500,000. To be eligible, though, a business must suffer direct damage. After rebuilding and replacing equipment, even with insurance money as well, there’s often little to invest in building back better. </p>
<p>For the many more small businesses indirectly affected – losing revenue for days, weeks or even months – there is minimal government assistance. The federal, state and territory governments have talked about financial measures that will extend to businesses with indirect impacts as a result of the bush fires, but in reality the support is going towards <a href="https://www.abc.net.au/news/2020-01-19/federal-government-announces-bushfire-recovery-tourism-package/11880114">tourism campaigns and events</a>. </p>
<p>If governments truly believe small and family businesses are the engine room of the economy, (as <a href="https://twitter.com/scottmorrisonmp/status/1116626191023128579?lang=en">Scott Morrison has said</a>), it’s time to put their needs on the table in post-disaster reconstruction plans. The current assistance and funding packages are not enough, not available to all affected businesses, and don’t help these businesses come back better than before.</p><img src="https://counter.theconversation.com/content/130871/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Samantha Sharpe receives funding from various government and non-government organisations including NSW Government, CSIRO and the United Nations specialist agency the International Labour Organisation (ILO). Samantha has not received any funds in relation to this article and declares no conflict of interest.</span></em></p>Small businesses are disproportionately affected by natural disasters. To improve community resilience, we need to help them ‘build back better’.Samantha Sharpe, Research Director, Institute for Sustainable Futures, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1197152019-07-23T11:13:10Z2019-07-23T11:13:10ZAddressing mental health issues in small businesses could bring major boost to the economy<figure><img src="https://images.theconversation.com/files/285310/original/file-20190723-110162-1j164aw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Stressed out.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/search/work%20stress?search_source=base_landing_page&image_type=all">Shutterstock</a></span></figcaption></figure><p>Mental health awareness has risen enormously in recent years. Celebrities from athlete Michael Phelps to Prince Harry and pop star Lady Gaga have <a href="https://www.hellomagazine.com/healthandbeauty/health-and-fitness/gallery/2019050472699/celebrities-on-mental-health/1/">spoken publicly</a> about their mental health struggles and the stigma surrounding them.</p>
<p>But business has been slow to react – particularly smaller ones. Our <a href="http://midlandsinnovation.org.uk/midlands-innovation.aspx">research with businesses in Britain’s Midlands region</a> shows that the majority of small and medium-sized businesses (SMEs) struggle to support their staff as they battle various mental health issues. As well as raising health concerns, this has a huge impact on the economy. </p>
<p>There are <a href="https://www.fsb.org.uk/media-centre/small-business-statistics">5.7m SMEs in the UK</a> (accounting for 99% of all businesses) and they employ close to 16m people, contributing 20% to UK GDP. Meanwhile, mental health issues, including stress, depression and anxiety, are thought to be responsible for 91m lost working days each year in the UK, <a href="http://www.acas.org.uk/index.aspx?articleid=3915">costing the economy £30 billion</a>. About 10% of this was due to staff replacement costs, 30% down to people being off sick (absenteeism) and 60% of the cost due to reduced productivity at work (presenteeism). </p>
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Read more:
<a href="https://theconversation.com/time-to-take-a-sick-day-working-when-ill-is-bad-for-you-and-your-company-50412">Time to take a sick day: working when ill is bad for you – and your company</a>
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<p>From an economic perspective, workplace mental health issues lead to higher unemployment rates and diminished productivity. With the UK’s productivity <a href="https://www.ft.com/content/6ada0002-9a57-11e8-9702-5946bae86e6d">lagging behind its peers in the G7 of advanced economies</a>, and given the contribution of SMEs in the economy, working out how to alleviate mental health problems is crucial.</p>
<p>According to a recent <a href="https://www.oecd.org/cfe/smes/ministerial/documents/2018-SME-Ministerial-Conference-Plenary-Session-1.pdf">OECD report</a>, SMEs are yet to prioritise mental health and well-being due to a lack of awareness about the business benefits and they lack information around the best ways to help their staff. Compared to larger companies, small businesses suffers from a number of constraints including day-to-day struggles just to survive, ad-hoc business processes, non-existent human resources departments and poor people management, higher turnover of employees and a lack of agility.</p>
<h2>The struggle to survive</h2>
<p>Many SMEs are competing against big multinationals and <a href="https://bdaily.co.uk/articles/2019/06/07/sme-owners-are-concerned-about-corporate-competition">feel this competition intensely</a>. Their business viability often feels at peril. As one business owner of a West Midlands manufacturing SME told us: “Every day is challenging not only for acquiring new orders but also delivering them and adhering to the desired quality.” </p>
<p>The struggle to achieve the right balance between demand for their business and being able to supply their product or service means many small firms struggle to give their employees job certainty. As the CEO of a company that manufactures car components told us: </p>
<blockquote>
<p>In this dynamic environment, everybody’s (both owner and employee) job is uncertain.</p>
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<p>Not only does this make it difficult to put structures in place to help employees with their mental health issues, it adds to them. It’s also a reason why many small businesses have long working hours. To survive in the competitive environments they are in, <a href="https://www.economicsonline.co.uk/Business_economics/Survival_of_small_firms.html">they cut corners</a>. </p>
<p>This means employing the minimum number of people possible. But this attempt to reduce the company’s operating costs <a href="https://www.accountancyage.com/2018/10/12/three-quarters-of-sme-owners-are-struggling-with-mental-health/">increases the working hours of each staff member</a> and this not only affects their physical health but mental health too. A production manager of a steel beam fabricating company told us: </p>
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<p>As our demands fluctuate a lot, it is practically impossible to schedule manpower and facilities in-line with customers’ requirements. Therefore, to meet the demand, we must often overuse our resources including human resources.</p>
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<p>SMEs are, by their nature, highly specialised. To remain competitive they focus on efficiency over flexibility. With demand controlled by customers, to cope with the fluctuations, the only resource they can alter is their human resource, which causes tremendous mental stress on employees. </p>
<p>The small workforce structure of SMEs <a href="https://www.oecd.org/cfe/smes/2090740.pdf">requires staff to often fulfil multiple roles</a>. This increases the amount of ambiguity they have in their responsibilities and this causes psychological distress, job stress burnout, depression and work-life imbalance.</p>
<p>Many SMEs require employees to have specific technical skills. This can involve years of training and then lifelong, on-the-job learning as new processes and technology emerges. But our conversations with SME employees suggested that specialised skills gained in one sector often don’t transfer to others. This means that staff have to continuously upgrade their knowledge and learn new skills to keep them employable in a competitive and turbulent job market. They have to search for appropriate resources and spend extra time, effort and finances, which further adds to the work-life imbalance, stress and anxiety. </p>
<p>The advent of new technology has made some business processes easier but it <a href="https://theconversation.com/the-need-to-work-less-is-a-matter-of-life-and-death-95976">also creates more stress</a>. Smartphones and social media, for example, have resulted in staff feeling like they have to work 24-7 and be responsive to every work need. The demands of the job have increased and impinge on people’s private lives.</p>
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<img alt="" src="https://images.theconversation.com/files/285312/original/file-20190723-110162-uoy11u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/285312/original/file-20190723-110162-uoy11u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=392&fit=crop&dpr=1 600w, https://images.theconversation.com/files/285312/original/file-20190723-110162-uoy11u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=392&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/285312/original/file-20190723-110162-uoy11u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=392&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/285312/original/file-20190723-110162-uoy11u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=493&fit=crop&dpr=1 754w, https://images.theconversation.com/files/285312/original/file-20190723-110162-uoy11u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=493&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/285312/original/file-20190723-110162-uoy11u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=493&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Smartphones offer 24-7 email access.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/bored-distant-couple-ignoring-each-other-1299304093?src=cAUhEwPduGohWBC34CQ-LQ-1-13&studio=1">Shutterstock</a></span>
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<h2>There are solutions</h2>
<p>These issues have not escaped the government’s notice. The <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/658145/thriving-at-work-stevenson-farmer-review.pdf">Stevenson-Farmer Review</a> was a major report published in October 2017, which looked into mental health issues at work and outlined several recommendations to help staff and businesses facing these issues. </p>
<p>They include developing mental health awareness among employees in the workplace, encouraging conversations when people are struggling and promoting effective people management between line managers and supervisors.</p>
<p>Similarly, our research found that training managers to embrace effective people management and effective communication across their company hierarchy was really important. It helps address mental health issues by building trust and connectedness within the workforce. And is also helps to reduce the stigma to discuss these issues. </p>
<p>Getting across the business case of recognising mental health issues is also important – especially for companies that think they do not have the time or money to deal with this. By putting preventive strategies in place and investing in their human resources, companies will perform better in the long run.</p><img src="https://counter.theconversation.com/content/119715/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors have received funding from Midlands Innovation to research and organise workshops for the collaborative project 'Mental Health and Well-being Challenges for West Midlands SMEs’ Sustainability and Productivity'. </span></em></p><p class="fine-print"><em><span>
The authors have received funding from Midlands Innovation to research and organise workshops for the collaborative project 'Mental Health and Well-being Challenges for West Midlands SMEs’ Sustainability and Productivity'.</span></em></p>Small businesses fail to recognise the business benefits and importance of prioritise staff mental health and well-being.Soumyadeb Chowdhury, Lecturer Information and Communication Technology, Aston Business School, Aston UniversityPrasanta Kumar Dey, Professor of Operations Management, Aston UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1010792019-02-12T18:51:42Z2019-02-12T18:51:42ZInnovation and internationalisation: A competitive advantage for small- and medium-sized enterprises<figure><img src="https://images.theconversation.com/files/256908/original/file-20190202-109820-k3p6bq.jpg?ixlib=rb-1.1.0&rect=0%2C53%2C4500%2C2943&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Innovation and internationalisation can work together to promote SME growth.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/695262562?size=huge_jpg">Shutterstock</a></span></figcaption></figure><p>To grow and prosper, national economies need innovative and internationalised small and medium-sized enterprises (SMEs). Such firms can make up to more than 97% of the total number of companies in some countries. In France, SMEs account for 95% of enterprises, 50% of workers, and <a href="https://www.economie.gouv.fr/cedef/chiffres-cles-des-pme">57% of added value</a>.</p>
<p>Over the last decade, businesses’ ability to spread across borders has become a determining factor in their competitiveness. Their ability to develop and launch new products, services or innovative processes confers a competitive advantage, can help ensure a return on investment and a long-term strategic advantage.</p>
<p>Research shows that when small business innovate, they experience increased <a href="https://theconversation.com/making-indonesia-4-0-and-supporting-digital-startups-is-good-but-what-about-the-small-low-tech-entrepreneurs-93863">productivity, potential growth and general sustainability</a>. In some economic sectors, the proportion of innovative SMEs exceeds that of large companies; more than <a href="https://www.inpi.fr/sites/default/files/inpi_analyses_2017_entreprises_privees_deposantes_de_brevets_en_2016_0.pdf">20%</a> of French firms filing patents are small businesses.</p>
<p>When confronted with serious structural or technological changes, the evolution of markets is constrained by innovation. Global strategic direction, the enlargement of the external environment, and the acquisition of international customers are positive factors in the development of a self-sustainable innovation dynamic.</p>
<h2>Internationalisation and innovation</h2>
<p>While previous research has explored the connection between innovation and international development, our <a href="http://www.ccsenet.org/journal/index.php/ibr/article/view/17525">current work</a>, based on a sample of 335 French SMEs, has established that technological resources are key drivers.</p>
<p>The innovation process is based on a company’s ability to activate its existing and available internal knowledge. It also depends on the firm’s capacity to gain knowledge from external sources through imitation strategies, licensing acquisition, partnerships or the purchase of patents. Export strategies increase the innovative capacity of small- and medium-sized companies by increasing their access to resources such as skilled labour.</p>
<p>Global activities allow direct access to business partners and international experts in venture-capital markets. Only <a href="https://ec.europa.eu/eurostat/fr/news/news-releases">30% of European SMEs</a> engage in exportation, while in France the figure is about <a href="http://www.cae-eco.fr/IMG/pdf/083.pdf">16%</a>. Product innovation is presented as a major factor of the <a href="https://link.springer.com/article/10.1007/s00181-009-0322-6">propensity of German companies to export</a>.</p>
<p>Moreover, SMEs operating within an industry or with technologically advanced suppliers <a href="http://www.sciepub.com/reference/44401">have higher innovation potential</a>. Research has shown that if business are constrained by geographic limitations, that also <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1496714">constrains their innovation capabilities</a>.</p>
<p>Internationalisation provides the opportunity to increase their resources by reaching new markets. This leverage frees internal financial resources. Access to external financing is also improved through export activities, providing convenient access to new networks of potential investors more willing to participate in innovation efforts. Proximity allows access to critical information in terms of current and potential customers ‘expectations. Much research considers customers as the main lever of product innovation.</p>
<h2>Toward more innovation and internationalisation of SMEs</h2>
<p>Nevertheless, implementing mixed strategies can result in major difficulties. The size of SMEs limit innovation or internationalisation strategies, as they can they consume significant financial, technological, commercial and human resources. Considered fragile in terms of resources, small businesses maintain performance through high flexibility. The synergy expected as a consequence of the joint development of both innovation and internationalisation is limited by the low transferability of resources. Indeed, cultural and institutional distances can drastically reduce the transmission of skills and knowledge.</p>
<p>The results of our research allowed for a better adaptation of public innovation and export policies, which are separated and individually managed. The French Employment Orientation Council has identified more than 2,500 different promotion programs, mainly based on financial support, but coordination is lacking and effectiveness limited. Indeed, a study conducted by ANVAR (French organisation for the improvement of innovation in SMEs) reported that 39% of the firms that received financial support still failed. By focusing on support in codifying the existing innovations, public policy would sustain the internationalisation strategy, increase the value added and the industry production, and induce a job-creation effect.</p><img src="https://counter.theconversation.com/content/101079/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marjorie Annick Lecerf ne travaille pas, ne conseille pas, ne possède pas de parts, ne reçoit pas de fonds d'une organisation qui pourrait tirer profit de cet article, et n'a déclaré aucune autre affiliation que son organisme de recherche.</span></em></p>SME’s ability to innovate and work internationally can give them an advantage in the marketplace, and ensure a long-term return on investment.Marjorie Annick Lecerf, Professeur d'économie, PSB Paris School of BusinessLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1077972018-12-06T01:12:24Z2018-12-06T01:12:24ZThanks for the $2 billion for small-business expansion; now all we need are plans to expand<figure><img src="https://images.theconversation.com/files/248962/original/file-20181205-186061-1g8owm5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Most small and medium-sized companies in Australia have no written plan for future growth.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The Australian government has a plan to help the nation’s small and medium-sized businesses – but it’s not a very well-developed one. </p>
<p>Its cornerstone is A$2 billion for a “Securitisation Fund” to provide loans to small business through smaller banks and non-bank lenders, plus a “Business Growth Fund” that will enable big banks and super funds to take passive equity stakes in small business. The assumption is that more money will help small and medium-sized enterprises fund their expansion plans. </p>
<p>The problem is most small and medium companies do not have expansion plans. </p>
<p>The Australian Bureau of Statistics’ first management capability survey, published in August 2017, indicates that only a third of medium-sized companies (defined as those with 20 to 199 employees) have a written plan of any kind. The percentage is much lower for small companies – those with five to 19 employees (and lower still for micro-businesses, employing four or fewer people). </p>
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<p>The Australian Centre for Business Growth at the University of South Australia collects data and delivers programs for those running small and medium-sized companies. Since it began in 2014, the centre has worked with more than 1,500 business proprietors. They all wanted to do better. Hardly any of them had a plan. </p>
<p>The federal government’s assistance package seems to assume that access to more capital will accelerate company growth. Our experience suggests executives of small and medium companies need knowledge capital as well as financial capital to grow. </p>
<p>If they don’t know what to do when, who to hire, how to manage people, or how to plan and execute, simply providing more money does not accelerate growth. </p>
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<p>This year we collected data from 145 of the companies that have been through one of our growth programs. In the past financial year they increased their revenues, on average, by 27%, their profits by 19%, and employment by 32%. Their growth was the result of learning how to develop and execute an expansion plan, that is, knowing how to generate and where to deploy financial capital in order to grow.</p>
<h2>Passing a public-interest test</h2>
<p>It’s true that small and medium enterprises need money for growth. But before they get funding, they need to learn what to do with that money to grow. </p>
<p>Driver’s education and a proficiency test are compulsory before we give people a licence to drive a car. We need something equivalent before we provide public funds – even as loans – to businesses. </p>
<p>We justify allowing people to borrow against their homes to start a company because it’s “their decision” and “their money”. But if taxpayers’ money is being provided, the federal government has a duty of care to ensure every company has a comprehensive plan for growth before receiving funding. </p>
<p>That plan should cover all the bases from products to markets and customers; culture, people and organisation; finance; risks and externalities; governance and strategy. </p>
<p>If financial capital is not coupled with knowledge capital, investments in small and medium-sized companies will not deliver returns. Only after those running a company understand how to grow, and have a plan to grow, will they achieve what we all want – more jobs, higher wages, and greater economic prosperity for all.</p><img src="https://counter.theconversation.com/content/107797/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jana Matthews is the Director of the Australian Centre for Business Growth at the University of South Australia's Business School. </span></em></p>Simply providing more money will not accelerate the growth of small and medium-sized enterprises.Jana Matthews, ANZ Chair in Business Growth. Director, Australian Centre for Business Growth, University of South AustraliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1024292018-09-03T14:02:04Z2018-09-03T14:02:04ZWhy Tanzanian women entrepreneurs don’t apply for formal loans<figure><img src="https://images.theconversation.com/files/234301/original/file-20180830-195319-hw4ka2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Research suggests that women enterprises in Tanzania are shy to take up business loans.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>With an annual <a href="https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?end=2017&locations=TZ&start=2013">GDP growth of 7%</a> since 2013, Tanzania is one of the fastest growing economies in sub-Saharan Africa. Much of this economic growth is driven by small and medium sized enterprises, more than half of which are <a href="http://www.fsdt.or.tz/wp-content/uploads/2016/05/MSME-National-Baseline-Survey-Report.pdf">owned by women</a>.</p>
<p>But, women-owned businesses in emerging economies like Tanzania often can’t grow because of a lack of financing. </p>
<p>The most important financing source for small businesses worldwide is debt. However, <a href="http://www.ilo.org/empent/areas/womens-entrepreneurship-development-wed/WCMS_430949/lang--en/index.htm">research</a> shows that many women entrepreneurs in emerging economies don’t hold formal loans such as bank and microfinance loans. Traditionally the assumption has been that this is caused by a lack of supply. But data points to a different answer. </p>
<p>A 2013 <a href="https://www.tandfonline.com/doi/abs/10.1080/13691066.2017.1358927?journalCode=tvec20">survey</a> among women entrepreneurs in Tanzania showed that more than 80% of bank loan applications and more than 90% of microfinance loan applications had been approved. At the same time, only 18% of women entrepreneurs applied for bank loans and 28% for microfinance loans. </p>
<p>This suggests that a lack of demand instead of a lack of supply is to blame for the limited use of formal loans by Tanzanian women entrepreneurs. This is the result of borrower discouragement: women have negative beliefs with respect to bank and microfinance loans, which discourages them from applying. </p>
<p>In our <a href="https://limo.libis.be/primo-explore/fulldisplay?docid=LIRIAS1719250&context=L&vid=Lirias&lang=en_US&search_scope=Lirias&adaptor=Local%20Search%20Engine&tab=default_tab&query=any,contains,staffnr_U0096673&sortby=date&offset=0">study</a> we set out to identify women entrepreneurs’ beliefs about bank and microfinance loans. We also explored where these beliefs originated from and exactly how they discourage women from borrowing. We interviewed 29 women entrepreneurs from Dar es Salaam, Tanzania’s largest city and economic capital. </p>
<p>We found that there are many different reasons why women entrepreneurs don’t apply, many of them interrelated.</p>
<h2>Lack of trust</h2>
<p>Most women we spoke to said they didn’t believe that loan officers discriminated against women. But they complained about the unattractive borrowing terms offered by banks. We heard stories of extremely high interest rates (up to 20% or even 30% annually) and collateral requirements. </p>
<p>Many women told us that they had no collateral. They either didn’t own a house or land or didn’t have their husbands’ permission to use them as collateral. </p>
<p>In addition, those who could use their houses as collateral didn’t want to risk losing them in the event of defaulting. </p>
<p>Entrepreneurs mentioned that high taxes as well as adverse economic and political conditions reduced their profits. </p>
<p>As a result, many feared that they would fail to pay back their loan and would then face harassment or abuse by loan officers.</p>
<p>Apart from unattractive borrowing terms and default risk, many argued that application processes were long and costly. One informant told us she couldn’t provide the extensive financial information required because she didn’t keep accounts.</p>
<p>And loan officers often requested bribes to speed up the process or bend requirements.</p>
<p>The women also complained about various types of inappropriate behaviour from loan officers. Two women mentioned that loan officers asked for sexual favours in exchange for a loan. Others blamed them for exploiting entrepreneurs’ lack of financial knowledge. </p>
<p>For example, women who do end up applying for loans don’t know that payments increase if they are late in paying back their loans, or that the bank has the right to sell their collateral. </p>
<p>We also heard stories of loan officers who visited women entrepreneurs in their businesses or even at home to convince them to take out a loan. One informant claimed that loan officers purposefully sought out entrepreneurs with valuable assets in the hopes of seizing them in case of default.</p>
<h2>Painful experiences</h2>
<p>Two mechanisms shape women entrepreneurs’ beliefs: personal experiences and stories from others.</p>
<p>Some informants applied for loans in the past and were rejected; others had trouble reimbursing their loan or experienced other problems such as corruption. Even if they’d had these experiences taking out informal loans, it nevertheless affected their beliefs about formal loans. </p>
<p>Stories of other people’s negative experiences with both formal and informal loans also shaped their beliefs. These stories either come from within the entrepreneur’s personal network or were passed on within the community. </p>
<p>Women entrepreneurs’ negative beliefs about formal loans give rise to negative attitudes. Some mentioned that getting a loan would reduce their freedom to run the business and use the money as they saw fit.</p>
<p>Because of their negative attitudes most women entrepreneurs said they didn’t intend to apply for a loan any time soon. One said that a bank or microfinance loan would be the last thing she would do to access money for her business. </p>
<h2>What needs to be done</h2>
<p>In the past policymakers have tried to address women-owned businesses’ lack of financing by increasing the supply of finance. But our research shows that this is addressing the wrong problem. In Tanzania women entrepreneurs aren’t deterred by a lack of supply. They don’t apply for formal loans for a host of reasons – most of them negative beliefs.</p>
<p>This is what needs to be changed. But that’s easier said than done. </p>
<p>Often, entrepreneurs’ beliefs are rooted in legitimate issues such as loan officers’ inappropriate behaviour. So it’s imperative that policymakers tackle problems such as corruption, harassment and abuse. </p>
<p>In other cases negative beliefs are probably the result of entrepreneurs’ lack of knowledge and low financial literacy. This can be mitigated by educating women entrepreneurs on how to keep accounts, how to invest loans and explanations on the relationship between interest and risk.</p><img src="https://counter.theconversation.com/content/102429/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Vanessa Naegels receives funding from the Belgian Development Cooperation via VLIR-UOS. VLIR-UOS supports partnerships between universities in Flanders and the South, which seek innovative answers to global and local challenges. More info on <a href="http://www.vliruos.be">www.vliruos.be</a>.</span></em></p>Women-owned small business in Tanzania stay away from formal loans because of their negative beliefs about loans.Vanessa Naegels, PhD researcher, KU LeuvenLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1009022018-08-02T13:37:36Z2018-08-02T13:37:36ZWhy small businesses really do struggle to understand red tape<figure><img src="https://images.theconversation.com/files/230214/original/file-20180801-136661-zdamz9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/red-tape-around-briefcase-labeled-brexit-1038794731?src=GDsjsSNbfh7p0UD3tCA6mw-1-6">Shutterstock</a></span></figcaption></figure><p>Regulations are a part of everyday life. They cover everything from the <a href="https://www.ofwat.gov.uk/regulated-companies/price-review/">cost and quality</a> of the things we buy, to <a href="https://www.gov.uk/browse/employing-people/contracts">conditions of employment</a> and the way our <a href="https://www.planningportal.co.uk/info/200128/building_control">homes are constructed</a>. Yet most of the time they go unnoticed. </p>
<p>As a set of rules which specify the minimum standards companies and individuals should follow, regulations are put in place because they are deemed to be in the broad public interest. Yet they only work when they are followed – and this only happens when the people responsible for implementing them understand what they should be doing. </p>
<p>A gap in knowledge could be the difference between one firm correctly using safety equipment and another firm putting their employees and customers at risk by not even knowing such equipment exists. Part of the difficulty in complying with regulations is they can be complex and often changed. This means firms have to work hard to keep their knowledge and procedures up to date. What was required ten or 20 years ago is often no longer the case now. </p>
<p>Small firms often find regulation particularly challenging simply because they don’t have the capacity to devote time or money to learning about it. It doesn’t help that regulations are often considered as unnecessary “red tape”, full of rules which appear to lack common sense. Should it really be illegal, for example, for companies selling bottled water to inform potential customers that drinking it will <a href="https://www.telegraph.co.uk/news/worldnews/europe/eu/8897662/EU-bans-claim-that-water-can-prevent-dehydration.html">help with rehydration</a>?</p>
<p>Even the recent changes in General Data Protection Regulation (GDPR) – all those emails asking you to sign up to mailing lists – which were publicised for years before the deadline, were complex. There is still plenty of confusion about what is actually required, so unsurprisingly, many firms have <a href="https://www.bbc.co.uk/news/business-44208456">struggled to meet</a> their new obligations.</p>
<p><a href="http://dx.doi.org/10.1111/1467-8551.12314">Our research</a> on some of the smallest firms in the UK tourist sector found that many owners and managers demonstrated considerable overconfidence when it comes to regulations. Many admitted having imperfect regulatory knowledge in areas fundamental to their operations, but still continued to run their businesses anyway. </p>
<p>This is worrying. All firms should have a functioning knowledge of the basic rules on employment, fire safety, discrimination, and health and safety. Would you prefer to stay at a bed & breakfast run by people who didn’t they should have conducted a <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/11085/payingguests.pdf">fire risk assessment</a> (and subsequently developed plans and installed equipment), or at an alternative establishment which complies with such requirements?</p>
<p>Trade associations are often considered a key source of support for small firms, assisting with limitations firms face because they are small. During our study we found that they do indeed provide lots of helpful information on things like rules and regulations. </p>
<h2>Understanding the rule book</h2>
<p>Yet, surprisingly, we found that membership of trade associations doesn’t really improve what micro-firm owners and managers actually <em>know</em> about regulation. It just makes them think they know more.</p>
<p>This means they risk making poor business decisions, potential prosecution for breaking the law, and even unnecessarily risk public safety – all because of their own misunderstanding of what the law really requires. This is likely to be caused by information overload and a false sense of security created by receiving – but not necessarily reading – the detailed information provided.</p>
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<img alt="" src="https://images.theconversation.com/files/230248/original/file-20180801-136661-p1r136.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/230248/original/file-20180801-136661-p1r136.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/230248/original/file-20180801-136661-p1r136.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/230248/original/file-20180801-136661-p1r136.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/230248/original/file-20180801-136661-p1r136.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/230248/original/file-20180801-136661-p1r136.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/230248/original/file-20180801-136661-p1r136.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Pick the one which understands the regulations.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/traditional-bed-breakfast-sign-surrounded-by-141263332?src=FASAQXfRe3lFq4Gshl2eAg-1-0">Shutterstock</a></span>
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</figure>
<p>We also found that firms with a positive approach towards regulation generally had greater knowledge, so perhaps a healthy attitude is an important part of learning more. </p>
<p>This all suggests that we need to move away from viewing rules and regulations as being meddlesome and unwelcome red tape. Instead, businesses need to consider them positively as sensible measures which protect them – and the public. Trade associations could play a key role here, given their regular communication and trusted status with member firms. But they also need to find new ways of making sure the information they provide is both understood and acted upon.</p>
<p>While the debate about <a href="https://theconversation.com/uk/eu-referendum-2016">Brexit continues</a> in the UK, politicians should keep in mind that firms are struggling to learn about and implement rules and regulations which already exist. </p>
<p>If Brexit results in significant changes in what companies should be doing – even if that means cutting red tape as some politicians claim – then the smallest companies are likely going to find it hugely challenging to make sure they know what they should be doing, never mind actually doing it.</p><img src="https://counter.theconversation.com/content/100902/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Phil Tomlinson receives funding from the Regional Studies Association under the RSA Expo scheme and from the European Regional Development Fund (ERDF) to fund two business acceleration hubs in the South West of England.</span></em></p><p class="fine-print"><em><span>J. Robert Branston and Marc Betton do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>And Brexit could make things even more challenging.J. Robert Branston, Senior Lecturer (Associate Professor) in Business Economics, University of BathMarc Betton, Researcher, University of BathPhil Tomlinson, Associate Professor in Business Economics, Deputy Director Centre for Governance, Regulation and Industrial Strategy (CGR&IS), University of BathLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/918382018-02-26T19:13:20Z2018-02-26T19:13:20ZHow universities can make graduates employable with connections to industry<figure><img src="https://images.theconversation.com/files/207200/original/file-20180221-161911-pdzt1e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">For universities to produce employable graduates, they need to work collaboratively with industry partners in educating their students.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p><strong><em><em>This article is part of a <a href="https://theconversation.com/au/topics/ideas-to-reform-higher-education-50647">series</a> exploring ideas for reforming higher education in Australia. We asked academics to analyse overseas models, innovative ways forward in a digital world, and ideas we may not have considered.</em></em></strong></p>
<p>Minister for Education and Training, Simon Birmingham, wants to <a href="https://www.senatorbirmingham.com.au/improving-the-employment-potential-of-graduates/">“boost the employment prospects of graduates” and offer “better value for taxpayers”</a>. There are challenges to doing so. </p>
<p>Accelerating digital change is a major challenge. The <a href="https://www.mckinsey.com/global-themes/future-of-organizations-and-work/what-the-future-of-work-will-mean-for-jobs-skills-and-wages">McKinsey Global Institute</a> estimates half of current work activities could be automated using existing technology. <a href="http://www.oecd.org/els/emp/wcms_556984.pdf">The OECD says</a> jobs will increase, but workers will need different skills. </p>
<p>Universities can update and change their curriculum. But if Australian business is not keeping up with technology, graduates will be prepared for jobs of the future not jobs on offer. Sadly, this is becoming a reality. <a href="https://www.pc.gov.au/inquiries/completed/productivity-review/report/productivity-review.pdf">Productivity Commission data shows</a> Australian business productivity and technology adoption is slowing.</p>
<h2>There is a training gap</h2>
<p>Many current business leaders graduated knowing one discipline well with some skills to use their knowledge. They typically worked for a business that gave on-the-job training. Over time, they took a further qualification to broaden their skills for management roles. The MBA, for example, has developed for that purpose.</p>
<p>Today, it’s different. Small and medium sized businesses (SMEs) have neither the time nor budget to train graduates. They face cost and price competition and want to hire experienced workers. <a href="http://www.abs.gov.au/ausstats/abs@.nsf/0/85372091B76BD119CA257B710014993B?Opendocument">Australian Bureau of Statistics (ABS) 2016 data</a> showed 99.5% of business employers are SMEs with under 200 employees. </p>
<p>At the other end, big businesses hire fewer fresh graduates. For example, where large numbers of accounting or law graduates used to build on their skills and gain experience through preparing accounts or contracts, most of this is now automated and employers want graduates to have that experience already. </p>
<h2>What does this mean for universities?</h2>
<p>Discipline knowledge, such as engineering or media is important. But graduates also need experience collaborating in multi-disciplinary, cross-cultural teams to solve complex problems, using significant amounts of information and data. Communication and technology skills are essential.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/207807/original/file-20180226-140184-lfweug.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/207807/original/file-20180226-140184-lfweug.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/207807/original/file-20180226-140184-lfweug.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/207807/original/file-20180226-140184-lfweug.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/207807/original/file-20180226-140184-lfweug.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/207807/original/file-20180226-140184-lfweug.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/207807/original/file-20180226-140184-lfweug.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Collaboration skills, as well as specific discipline knowledge, are important for making graduates employable.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<p>Graduates need a clear idea of their career purpose. They need mental and practical tools for fast-changing careers in the gig economy, where full-time, long-term employment is <a href="https://www.fya.org.au/wp-content/uploads/2015/08/fya-future-of-work-report-final-lr.pdf">rare</a>. They need tools and practice to create and run the small businesses that drive Australian economic growth.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-problem-isnt-unskilled-graduates-its-a-lack-of-full-time-job-opportunities-90104">The problem isn't unskilled graduates, it's a lack of full-time job opportunities</a>
</strong>
</em>
</p>
<hr>
<p>To achieve this, universities need to use their deep knowledge of research to reinvent both the curriculum and the way they deliver it.</p>
<p>International labour market <a href="http://www.oecd.org/employment/future-of-work/">data</a> and analysis of the hundreds of millions of jobs and skills advertised globally is now <a href="https://www.fya.org.au/our-research/">available</a>. It gives clear indications of trends in skills and job requirements. Add to this the knowledge gained from universities’ collaboration with employers and research partners, and they have an unrivalled understanding of where technology in each discipline is moving. </p>
<p><a href="https://bond.edu.au/program/bachelor-laws#features">Bond’s law programs</a> use the expertise of the legal profession, such as drafting contracts, mediating disputes or representing clients to embed lawyering skills and practise from the first semester. </p>
<p>Swinburne’s <a href="http://www.swinburne.edu.au/engineering-practice-academy/">Engineering Practice</a> and <a href="https://www.swinburne.edu.au/australian-graduate-school-of-entrepreneurship/">Australian Graduate School of Entrepreneurship</a> Degrees use design thinking to co-create the curriculum with industry experts. </p>
<p><a href="https://healthsciences.curtin.edu.au/wp-content/uploads/sites/6/2017/11/interprofessional_A5_broch_1-29072015.pdf">Curtin’s inter-professional health programs</a> integrate World Health Organisation recommendations to train its students and industry together to create the collaborative health workforce to meet local community-based health needs. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/207216/original/file-20180221-5555-46lt94.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/207216/original/file-20180221-5555-46lt94.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/207216/original/file-20180221-5555-46lt94.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/207216/original/file-20180221-5555-46lt94.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/207216/original/file-20180221-5555-46lt94.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=425&fit=crop&dpr=1 754w, https://images.theconversation.com/files/207216/original/file-20180221-5555-46lt94.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=425&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/207216/original/file-20180221-5555-46lt94.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=425&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Health effectively integrates professional experience in the curriculum by integrating problem-based learning in hospitals with patient cases.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>Challenges</h2>
<p>One challenge is how we scale, bridge the experience gap, and help SMEs to use graduates to build business productivity and competitiveness. </p>
<p>First, we need to increase authentic professional experiences embedded in the curriculum, and replicate and simulate workplace challenges. Health has always done this well by integrating problem-based learning in hospitals with patient cases into the curriculum. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/demand-for-people-skills-is-growing-faster-than-demand-for-stem-skills-86754">Demand for people skills is growing faster than demand for STEM skills</a>
</strong>
</em>
</p>
<hr>
<p>Now in most courses, first year experiences build through to capstone projects. Work integrated learning and internships are <a href="https://www.swinburne.edu.au/current-students/work-integrated-learning/swinburne-advantage/">increasing</a>. </p>
<p>But every student will not get a work placement, and sometimes placements do little to prepare students for work. Employers need to invest time and training to make it worthwhile for both the student and the employer. </p>
<p>Instead, universities have to simulate workplaces at the university together with industry partners. Universities can then work with SMEs on tailor-made projects that also help the SME. </p>
<p>Universities cannot build advanced manufacturing facilities for students to train in from day one. So companies like <a href="https://www.swinburne.edu.au/news/latest-news/2017/08/135-million-grant-to-digitalise-swinburnes-factory-of-the-future.php">Siemens</a> and <a href="http://www.unisa.edu.au/Media-Centre/Releases/2018/Doors-open-to-the-future-of-learning---University-of-South-Australia-and-Samsung-launch-Samsung-SMARTSchool-at-UniSA/#.WpKKsRNubVo">Samsung</a> support universities with the latest technologies. </p>
<h2>Are we there yet?</h2>
<p>Definitely not. But universities often lead business in graduate preparation by embedding work experience into the curriculum. </p>
<p>The key is to ensure continued collaboration between employers and universities and to pay attention to the changing needs of businesses. Employers can then take advantage of graduates who have the skills and capabilities to drive their productivity and future success.</p><img src="https://counter.theconversation.com/content/91838/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Duncan Bentley received funding from the Office of Learning and Teaching for research into internationalisation of the curriculum to improve graduate employability. </span></em></p>To make graduates employable and close the training gap, we need to strengthen links to industry and pay attention to the changing needs of businesses.Duncan Bentley, Deputy vice-chancellor, Swinburne University of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/905612018-01-26T15:40:50Z2018-01-26T15:40:50ZBrexit’s impact on small businesses: the experts may be spot on after all<figure><img src="https://images.theconversation.com/files/203417/original/file-20180125-102738-zkbg2b.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p><a href="http://www.bbc.co.uk/news/uk-politics-32810887">Brexit</a> has the potential to fundamentally rewrite the rulebook governing how companies do business in the UK – and there’s certainly been no shortage of serious concern. Given the magnitude of the imponderables linked to Brexit it clearly has the potential to heighten uncertainty which can have damaging consequences for economic activity. </p>
<p>The overwhelming weight of <a href="http://www.cesifo-group.de/DocDL/cesifo1_wp6780.pdf">evidence</a> predicts Brexit-induced uncertainty will have a significant negative effect on the UK economy. Economic forecasts are often inaccurate, however, so it’s important to look at corporate sentiment, too.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/203424/original/file-20180125-102711-1x3riag.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/203424/original/file-20180125-102711-1x3riag.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=664&fit=crop&dpr=1 600w, https://images.theconversation.com/files/203424/original/file-20180125-102711-1x3riag.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=664&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/203424/original/file-20180125-102711-1x3riag.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=664&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/203424/original/file-20180125-102711-1x3riag.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=835&fit=crop&dpr=1 754w, https://images.theconversation.com/files/203424/original/file-20180125-102711-1x3riag.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=835&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/203424/original/file-20180125-102711-1x3riag.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=835&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Uphill struggle: Theresa May.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/download/confirm/659946046?src=-kvWggwbKmSGWJ8N6_XA9g-1-4&size=huge_jpg">Shutterstock</a></span>
</figcaption>
</figure>
<p>Most <a href="http://eprints.lse.ac.uk/83624/1/dp1487.pdf">academic</a> and <a href="https://www.ft.com/content/0c3427b2-5ce1-11e7-9bc8-8055f264aa8b">media</a> focus surrounding Brexit examines its impact on big companies. The <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2775954">analysis</a> has often examined what Brexit means for the future of large-scale foreign-owned manufacturing plants such as <a href="https://www.chroniclelive.co.uk/business/business-news/30-years-nissan-how-sunderland-11854830">Nissan</a> in north-east England.</p>
<p>But there is little evidence related to how <a href="http://ec.europa.eu/growth/smes/business-friendly-environment/sme-definition_en">small and medium-sized firms</a> (SMEs) are likely to be affected, despite the fact that they are often considered the backbone of the British economy. For this reason, a team of researchers at the universities of St Andrews and Essex <a href="https://www.st-andrews.ac.uk/business/rbf/workingpapers/RBF18_009.pdf">sought</a> to look into it.</p>
<h2>Backbone of the economy</h2>
<p>In the UK, there are some <a href="http://www.fsb.org.uk/media-centre/small-business-statistics">5.7m SMEs</a>, which account for over 99% of private sector firms and 60% of total UK private sector employment. SMEs also account for <a href="https://uk.webfg.com/news/news-and-announcements--/smes-will-suffer-most-from-brexit-study-reveals--3087386.html">73%</a> of all net private sector job creation in the UK, creating about <a href="https://www.nesta.org.uk/sites/default/files/the-state-of-small-business-uk.pdf">2m jobs</a> since 2010. Therefore, how SMEs respond to the uncertainty arising from Brexit has significant implications for the economy.</p>
<p>To assess the impact of Brexit on SMEs, we analysed a <a href="https://www.gov.uk/government/publications/small-business-survey-2016-businesses-with-employees">major government survey</a> of some 10,000 UK SMEs. The government had posed various questions to these businesses regarding Brexit and its likely affects on their future strategic intentions. Unlike the simulated data often used in economic forecasts, this has the advantage of being based on the real world views of entrepreneurs.</p>
<p>So what do the results tell us? The larger, more innovative, more export-oriented and hi-tech an SME is, the more likely it is to have concerns regarding Brexit. Those operating in hi-tech and service-related industries are also those most concerned. </p>
<p>In the chart below, we see that larger SMEs are more concerned that Brexit will act as an obstacle to their business activities. Around a quarter of larger SMEs (10+ employees) view Brexit as a major obstacle for their business. This could well be related to the fact that larger SMEs are much more likely to trade internationally (in both imports and exports):</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/203421/original/file-20180125-102711-1y30b99.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/203421/original/file-20180125-102711-1y30b99.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=336&fit=crop&dpr=1 600w, https://images.theconversation.com/files/203421/original/file-20180125-102711-1y30b99.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=336&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/203421/original/file-20180125-102711-1y30b99.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=336&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/203421/original/file-20180125-102711-1y30b99.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=423&fit=crop&dpr=1 754w, https://images.theconversation.com/files/203421/original/file-20180125-102711-1y30b99.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=423&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/203421/original/file-20180125-102711-1y30b99.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=423&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">UK exit from the EU as a major obstacle to the success of the business by employee size.</span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>Innovative and export-oriented SMEs seem particularly concerned about the ramifications of Brexit. As shown in the next chart, twice as many innovative firms and nearly three times as many exporters compared to non-exporters view Brexit as a major obstacle. Particular ownership characteristics also seem linked to acute uncertainty, especially urban-located, family-owned and younger SMEs.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/203422/original/file-20180125-102744-12z2dx9.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/203422/original/file-20180125-102744-12z2dx9.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=339&fit=crop&dpr=1 600w, https://images.theconversation.com/files/203422/original/file-20180125-102744-12z2dx9.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=339&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/203422/original/file-20180125-102744-12z2dx9.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=339&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/203422/original/file-20180125-102744-12z2dx9.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=426&fit=crop&dpr=1 754w, https://images.theconversation.com/files/203422/original/file-20180125-102744-12z2dx9.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=426&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/203422/original/file-20180125-102744-12z2dx9.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=426&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">UK exit from the EU as a major obstacle to the success of the business by innovation capacity and international trading activity.</span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>As shown in the chart below, Brexit-related concerns are not felt uniformly across the UK. SMEs based in Northern Ireland and Scotland view Brexit appear more worried than their counterparts in England and Wales. This may reflect the voting patterns of households given both these territories voted emphatically to remain within the EU. In the specific case of Northern Ireland, it may be correlated to the highly embedded nature of the nation’s <a href="https://www.nesta.org.uk/sites/default/files/the-state-of-small-business-uk.pdf">integration</a> within the wider Irish economy.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/203423/original/file-20180125-102758-egvc2f.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/203423/original/file-20180125-102758-egvc2f.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=339&fit=crop&dpr=1 600w, https://images.theconversation.com/files/203423/original/file-20180125-102758-egvc2f.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=339&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/203423/original/file-20180125-102758-egvc2f.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=339&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/203423/original/file-20180125-102758-egvc2f.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=426&fit=crop&dpr=1 754w, https://images.theconversation.com/files/203423/original/file-20180125-102758-egvc2f.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=426&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/203423/original/file-20180125-102758-egvc2f.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=426&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">UK exit from the EU as a major obstacle to the success of the business by location.</span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>Crucially, we also examined what the likely impact of Brexit was for SMEs. We found that Brexit is likely to result in lower levels of capital investment, reduced access to external finance, reduced innovative activity and lower levels of growth. Future plans for capital investment within innovative SMEs seem particularly likely to be affected.</p>
<h2>Negative effects</h2>
<p>Evidently, this study shows that Brexit is having a material effect on the behavioural expectations of entrepreneurs and managers within SMEs. Worryingly, these perceived negative effects appear to be foremost in the minds of entrepreneurs located in the types of innovative and export-oriented companies, often viewed as the high growth “superstars” of tomorrow. In other words, firms thought most significant for boosting productivity and economic growth have the gravest reservations about Brexit for their future success.</p>
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<img alt="" src="https://images.theconversation.com/files/203426/original/file-20180125-102738-f2ng70.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/203426/original/file-20180125-102738-f2ng70.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/203426/original/file-20180125-102738-f2ng70.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/203426/original/file-20180125-102738-f2ng70.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/203426/original/file-20180125-102738-f2ng70.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/203426/original/file-20180125-102738-f2ng70.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/203426/original/file-20180125-102738-f2ng70.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">SMEs with high export activity remain worried about the effect of Brexit on their business.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/group-mature-violin-maker-pose-while-514697833">Shutterstock</a></span>
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<p>In future, the rather incoherent and intransigent “no deal is better than a bad deal” <a href="https://www.theguardian.com/commentisfree/2017/oct/18/thersa-may-brexit-eu-european-parliament">negotiating stance</a> of the current UK government coupled with the high political opacity surrounding Brexit will most certainly prolong, and even amplify, uncertainty levels in businesses of all sizes. This protracted process is very likely to be detrimental to the country’s economy, especially in the short to medium term.</p>
<p>Prior to the EU referendum, the pro-Brexit UK politician <a href="https://www.gov.uk/government/people/michael-gove">Michael Gove</a> famously declared (in his denunciation of the overwhelming majority of economists who warned of the potential economic damage caused by Brexit) “<a href="https://www.ft.com/content/3be49734-29cb-11e6-83e4-abc22d5d108c">that people in this country have had enough of experts</a>”. Based on the findings of our study, it appears that the “experts” may have got it right.</p><img src="https://counter.theconversation.com/content/90561/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>It looks like the economists who warned of the potential damage to UK businesses due to Brexit were correct.Ross Brown, Reader in Entrepreneurship and Small Business Finance, University of St AndrewsJohn O.S. Wilson, Professor of Banking & Finance, University of St AndrewsLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/847762017-09-28T19:06:09Z2017-09-28T19:06:09ZAustralia needs new insolvency laws to encourage small businesses<figure><img src="https://images.theconversation.com/files/187952/original/file-20170928-1460-1hv2krt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Banks aren't sure they will recover their money if SMEs fail.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The Ten Network’s recent experience of <a href="https://theconversation.com/ten-networks-problems-are-history-repeating-79420">voluntary administration</a> and subsequent <a href="https://theconversation.com/the-impact-of-cbss-takeover-of-ten-is-much-larger-than-just-one-network-83095">rescue by CBS</a> demonstrates how insolvency law works for large Australian companies. But <a href="http://www.abs.gov.au/ausstats/abs@.nsf/0/C575766838376FA0CA2573E1000E3F2F?Opendocument">97% of Australian businesses</a> are small or medium size enterprises (SMEs), and they face a system that isn’t designed for them.</p>
<p><a href="http://www.huffingtonpost.com.au/2015/09/28/small-business-failure_n_8187166.html">60% of small businesses</a> cease trading within the first three years of operating. While not all close due to business failure, those that do tend to face an awkward insolvency regime that fails to meet their needs in the same way it does Network Ten.</p>
<p>The lack of an adequate insolvency regime for SMEs inhibits innovation and growth within our economy. It adds yet more complexity to the already difficult process of structuring a small business. Further, it <a href="https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2016/12/31/Tackling-Small-and-Medium-Enterprise-Problem-Loans-in-Europe-42614">inceases the cost of funding</a>. Lenders know that recovering their money can be onerous if not impossible, so they impose higher costs of borrowing. </p>
<h2>Australia’s insolvency regime</h2>
<p>Australian insolvency law is divided into two streams, each governed by a separate piece of legislation. </p>
<p>The <a href="https://www.legislation.gov.au/Details/C2017C00312">Corporations Act</a> deals with the insolvency of incorporated organisations, and the <a href="https://www.legislation.gov.au/Series/C1966A00033">Bankruptcy Act</a> addresses the insolvency of people and unincorporated bodies (such as sole traders and partnerships). </p>
<p>Both schemes are aimed at providing an equal, fair and orderly process for the resolution of financial affairs. But a large part of the Corporations Act procedure has been developed with the complexity of a large corporation in mind. For example, there are <a href="https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2016/12/31/Tackling-Small-and-Medium-Enterprise-Problem-Loans-in-Europe-42614">extensive provisions</a> that allow the resolution of disputes between creditors that are only likely to arise in well-resourced commercial entities. </p>
<p>The Bankruptcy Act, by contrast, takes account of the social and community dimensions of personal bankruptcy. This legislation seeks to <a href="https://www.afsa.gov.au/insolvency/i-cant-pay-my-debts/what-are-consequences-bankruptcy">supervise the activities of the bankrupted person</a> for an extended period of time to encourage their rehabilitation.</p>
<p>SME’s awkwardly straddle the gap between these parallel pieces of legislation. Some SMEs are incorporated, and so fall under the Corporations Act. SMEs that are not incorporated are treated under the Bankruptcy Act as one aspect of the personal bankruptcy of the business owner. But of course, SMEs are neither people nor large corporations. </p>
<h2>How insolvency works</h2>
<p>Legislation governing corporate insolvency is founded on the assumption that there will be significant assets to be divided among many creditors. Broadly speaking, creditors are ranked and there are sophisticated and detailed provisions for their treatment. If Ten would have proceeded to liquidation, creditors would have been <a href="http://www.abc.net.au/news/2017-06-26/channel-ten-may-yet-be-saved-from-receivership/8653522">broadly grouped into three tiers</a> and paid amounts well into the tens of millions.</p>
<p>One type of creditor is a “<a href="http://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/ppsa2009356/s12.html">secured creditor</a>”. Banks, for example, will often require that <a href="http://www.smh.com.au/business/cbd/costs-keep-adding-up-for-bruce-gordon-and-lachlan-murdochs-ten-bid-20170917-gyj7ka.html">loans for the purchase of business equipment</a> are secured against that equipment. In the event of default, the bank takes ownership of the equipment in place of the debt, if they can’t be paid out. </p>
<p>Unsecured creditors, on the other hand, do not have an “interest” over anything. If a company goes into liquidation, an unsecured creditor will only be paid if there are sufficient funds left after the secured creditors have been paid, and the cost of the process has been covered. There is no guarantee that unsecured creditors will be paid. Most often, they are only paid a portion of what they are owed.</p>
<h2>The unique challenges of SME insolvency</h2>
<p>When it comes to SMEs, there is little or no value available to lower-ranking, unsecured creditors in an SME insolvency estate. At the same time, higher-ranking, secured creditors tend to have effective methods of enforcing their interest outside the insolvency process. For instance they could individually sue the debtor to recover money owed. As a consequence, creditors are rarely interested in overseeing or pursing an SME insolvency process. This means the system is not often used and creditors with smaller claims go unpaid.</p>
<p>Even if creditors do want to use the insolvency process, it is likely the SME’s assets are insufficient to cover the cost of employing an insolvency practitioner and the required judicial oversight. </p>
<p>This problem is made worse because SMEs <a href="http://idealog.co.nz/venture/2016/08/failed-not-finished-dealing-social-stogma-entreprenuerial-failure">often wait too long</a> to file for insolvency, owing to their lack of commercial experience or the social stigma of a failing business. Instead, debts continue to grow well beyond the point of insolvency, and responsibility falls on creditors to deal with the issue. </p>
<p>There are further difficulties depending on whether the SME is incorporated. Incorporated SMEs are frequently financed by a combination of corporate debt, taken on by the SME, and the personal debt of the business owner. This may result in complex and tedious dual insolvency proceedings: one for the bankruptcy of the owner and the other for the business. </p>
<p>Unincorporated SMEs, in turn, suffer from two stumbling blocks. First, the personal bankruptcy scheme has not been created to preserve the SME or encourage its turnaround. Second, personal bankruptcy proceedings require specific evidence that the person has committed an “<a href="http://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/ba1966142/s40.html">act of bankruptcy</a>”, such as not complying with the terms of a bankruptcy notice in the previous six months.</p>
<p>This hurdle makes the process far more time-consuming than the corporate scheme. It is also more difficult for creditors to succeed in recovering their investment and, by extension, prevents them from efficiently reallocating it. There is a real danger that this will deter creditors and <a href="http://documents.worldbank.org/curated/en/973331494264489956/Report-on-the-treatment-of-MSME-insolvency">raise the cost of capital at first instance</a>.</p>
<h2>What can we do about it?</h2>
<p>The best way to meet the needs of SMEs would be to create a tailored scheme that sits between the corporate and personal regimes, as has been done in <a href="http://www.uncitral.org/uncitral/en/data/whats_new/2017_05_presentations.html">Japan and Korea</a>. These regimes focus on speeding up the proceedings, moving the process out of court where possible and reducing the costs involved. </p>
<p>However, as the legislation in these two countries notes, there can be marked differences between small and medium-sized businesses that all fall under the SME banner. Therefore, what is needed is a flexible system made up of a core process, together with a large array of additional tools that may be invoked.</p>
<p>Designing such a scheme remains no easy feat. However, at its core, such a scheme would ideally allow business owners to commence the insolvency process and remain in control throughout. The process would sift through businesses to identify those that remain viable, and produce cost-effective means for their preservation.</p>
<p>Non-viable businesses would be swiftly disposed of, using pre-designed liquidation plans where possible and relying on court processes and professionals only where absolutely necessary. Creditors would therefore receive the highest return possible, and importantly, honest and cooperative business owners would be quickly freed from their failed business and able to return to economic life.</p><img src="https://counter.theconversation.com/content/84776/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Australia’s insolvency laws inhibit growth and innovation. They weren’t designed for small business, which make up 97% of all businesses.Kevin B Sobel-Read, Lecturer in Law and Anthropologist, University of NewcastleMadeleine MacKenzie, Research assistant, Newcastle Law School, University of NewcastleLicensed as Creative Commons – attribution, no derivatives.